Fident Capital secured $5.1MM of acquisition financing for a proposed 154-unit multifamily development in the vibrant Hillcrest neighborhood of San Diego. The borrower is an established construction company with a nationwide presence, including a local office in Carlsbad. The debt was sourced from a private lender who provided a 12-month term at 69% leverage. The financing allowed the borrower to fund a portion of the acquisition, demolition, and remaining soft costs to bring the project to a shovel-ready condition.
This assignment’s primary challenge was meeting a tight timeframe for securing acquisition debt to close a short escrow. Fident packaged the deal in four business days and brought it to several close capital relationships who could quickly provide terms for the financing. Fident’s materials provided a clear view of the investment, allowing potential lenders to quickly digest the proposed project, the sponsorship behind it, and its context within the market.
Another hurdle was navigating some of the nuance related to the borrower’s land basis. The borrower’s expertise with the City of San Diego’s recent Complete Communities initiative led to an acquisition at an attractive $35k/unit where comparable sites regularly trade in excess of $80k/unit. Arguing for recognition of some land equity based upon this fact, at the conclusion of a quick arms-length transaction, proved challenging. Even though the borrower’s basis was very compelling in a per unit context, pushing the basis too hard caused some potential lenders to contest the land value in terms of price per square foot, which was higher than the comp set due to the project’s unique unit mix of sub-500 SF studio and 1-bedroom units. Fident conducted a thorough analysis of recent sales in the area to identify comparable micro-unit projects that traded at similar price per square foot values. This analysis was crucial to getting the borrower an attractive LTC loan that fit lender requirements for low-LTV land debt.
Despite these challenges, the quality of the real estate itself and the borrower’s high density entitlement strategy contributed to a successful effort. Fident is pleased to play a role in bringing well-designed and well-located housing to one of San Diego’s most dynamic neighborhoods.
