Fident Capital secured $16.8MM of construction financing for the development of a 3-story walk-up, 76-unit multifamily project in National City, California. The borrower is a family operation with a decades-long track record of residential development in the surrounding area. A national bank provided leverage at 65% LTC at a favorable floating rate with a rate floor nearly 200 bps below the starting rate. The bank also paid a high yield on the borrower’s deposits (a requirement for close).

Despite their long development track record, this was the first time the borrower (a foreign national) had obtained construction financing from an FDIC-regulated bank. This step was necessary to continue building their development pipeline. The multinational borrower-guarantor structure required special attention from a credit perspective and the final deal structure involved the issuance of a standby letter of credit with the borrower’s primary banking institution in lieu of corporate and personal repayment guarantees. 

Title insurance presented another challenge. As title insurers have become more conservative, the selected title company was unwilling to provide upfront coverage required by the bank. Broken lien priority, as evidenced by the presence of a dumpster and gravel on the site, was their justification for withholding coverage, even with an owner’s affidavit certifying clean title from the demolition and fire mitigation work. Fident and the bank’s production team were able to secure an incremental coverage solution from title that satisfied the bank’s credit team.

Despite the turmoil in the capital markets, which kept many FDIC-insured lenders on the sidelines focused on portfolio management and staying solvent, Fident garnered plenty of bank interest and multiple term sheets, a few with low or no deposit requirements. The winning lender exceeded leverage expectations and brought a pragmatic deal-making approach to ensure the loan closed “as advertised”.