Fident Capital secured $17.0MM of construction financing for a five story 55-unit multifamily development in the North Park submarket of San Diego, CA. The borrower is a vertically integrated builder/developer with a strong track record in the immediate area. A Salt Lake City based private lender provided non-recourse financing in excess of the requested LTC, closing as proposed within their term sheet.
The client’s in-house architectural and general contracting prowess influenced the design of these highly efficient, loft-style units, including the use of Cross Laminated Timber (CLT) for the building’s floor plates. This was the first residential building in San Diego to utilize CLT.
A storied acquisition, attractive per square foot rental rates, and the cost-effective building type produced an exceptionally strong deal which supported a land lift more than twice the developer’s cost basis. This, combined with the lenders’ flexibility on deferring (market rate) fees in lieu of contributing cash equity worked well to minimize the clients’ cash equity contributions.
Validating pro forma revenue assumptions was a primary challenge of the assignment. The project offered limited parking and unique loft/mezzanine units that offered superior livability to studios within a smaller floorplan than a one-bedroom; the units had no direct comparable. Fident demonstrated the project’s relative whole dollar value proposition against the competitive units through extensive analysis and creative presentation of the offering’s overall value proposition.
The borrower hoped to begin demotion on the property before closing on the construction loan. In order to do that, and satisfy the lender’s ALTA policy requirements, the title company needed to change, mid-closing. Fident’s valuation analysis and collaboration with the incoming lender, title, and the existing lender’s eased concerns about a material change in collateral value and appropriate coverage for the new loan.
Despite the challenges, the project’s strong pro forma cap on cost of 7.25% and the favorable multifamily submarket demographics fueled lender interest. Even during that turbulent capital markets environment, when many lenders were otherwise inundated with loan requests and highly selective, Fident found a competitive market. The winning terms exceeded the loan proceeds sought by the borrower. The lender also has a deep knowledge of the building industry and supported the borrower’s desire to delay buying out the building trades to secure cost savings. Importantly, the lender operates unlevered, removing risks to close and future draws that could come with lenders reliant on the secondary financing markets.
Fident is pleased to support the creation of well-designed attainable housing in the San Diego area and are looking forward to seeing this project come to fruition.
