Fident Capital secured $29.0MM of bridge financing on a recently constructed mixed-use property with 52 apartments and ground floor retail. Loan proceeds funded the conversion of a multifamily asset, located only three blocks from the Ocean at the iconic Oceanside pier, into for-sale condos.

The project, mapped and built to condo specifications from its 2020 inception, pivoted to a for-rent strategy upon its completion in response to the Covid-induced spike in rental rates and parallel drop in cap rates. However, as the rental project moved towards stabilization, the Federal Reserve increased rates by 550 basis point increase, cap rates expanded, and prices for San Diego’s for-sale housing market spiked. Suddenly, condominiums were back in favor.

Fident found a bridge lender out of New York who has deep expertise in all aspects residential housing, including conversions, that funded common area refreshes, in-unit upgrades, and created an interest reserve to fund the loan as revenue dropped upon vacating rental units in order to sell them. Critically, the lender was able to meet the borrower’s mandate that refinance be cash neutral.

Fident’s considerable cash flow analysis, and scrutiny of the lender’s basis under both a for-sale and a rental model allowed us to secure a loan which met the requirements of the business plan while mitigating the lender concerns to limit asset exposure until it was clear that the for-sale model had sales traction.

Another deal challenge related to the nature of the mixed-use asset. The building’s wrap design surrounded a parking garage that was bifurcated into private (condo) and public uses as part of a Public Private Partnership with the City of Oceanside. Communicating the nuance of easements, access points, and operating responsibilities of the City or HOA required considerable care. Fident’s marketing efforts during a volatile time in the capital markets provided the required loan proceeds, was cash neutral, and featured a lenient repayment structure that balanced the lender’s requirement to sweep net sales proceeds against the borrower’s need to reserve for tax obligations (from sales). It also allowed for payment of the lender’s exit fee pro rata to sales.