Fident Capital secured $7.5MM of Joint Venture Equity for the acquisition and entitlement of a 25-acre residential site in Murrieta, CA. Largely undeveloped, the site occupies an excellent location in the Golden Triangle area of Murrieta and enjoys the benefit of a newly formed Transit Oriented District (T.O.D.) overlay. The timely and opportunistic acquisition of these 2 REOs allowed the Sponsor to capture the value derived through the recently formed T.O.D. prior the market fully assimilating the information. The Sponsor plans to entitle the asset for approximately 550 multifamily units within the next 12 months.
Fident Capital identified a strategic equity partner focused on land entitlement and land development. This private fund was uniquely matched for the project, especially considering their considerable experience in the Inland Empire. The fund possesses a nearly 40 year track record and has invested over $1.25B into land opportunities. In the final iteration of the deal, the fund supplied 100% of the required equity. The Sponsor earned market rate management fees and a very advantageous profit participation.
There were numerous challenges to execution. Principally, the deal had a unique structure wherein the investor actually owns the asset. The fund, backed by several university endowments targets long investment horizons but always takes fee title in deals they fund. The developer’s protection comes through a recorded development management agreement.
An additional hurdle was determining the optimal product mix. Fident and the Sponsor analyzed and underwrote several residential product types including apartments, for-sale townhomes and condos to help illuminate the optimal product configuration. After significant financial modeling, organic research, and collaboration with 3rd party experts, the Sponsor selected a two-phase, all 3-story, multifamily project.
Lastly, understanding and explaining the T.O.D.’s impact on the entitlement process proved crucial to funding. In 2013, the City of Murrieta amended their General Plan to comply with the State mandated Housing Element update, resulting in the subject property becoming part of a T.O.D. This effectively changed the current zoning from Office and Research Park to MF-3, requiring high density residential uses. Fident helped illuminate the nuance of these changes to allay equity’s concerns over typical California entitlement timelines.
