Fident Capital secured $7.1MM of joint venture equity for the construction of a 97-unit garden style multifamily project in Chula Vista, California. Equity financing, funded through an Austin-based correspondent to a prominent New York hedge fund, stands alongside the Sponsor’s co-invest and a $15.4MM non-recourse construction loan provided by a national banking source (65% LTC). The 5-acre site sits within the West Chula Vista corridor, a submarket of the larger San Diego south bay area.
This infill, raw land, is perfectly suited for the development. The Sponsor can be described as a “first mover” in what may well become a popular redevelopment area in San Diego County. The Sponsor’s off-market acquisition and entitlement efforts cut through a lot of misunderstanding about the nature of opportunity in this market and will deliver high-quality product into a market with sub 2% vacancy and virtually zero incoming supply. Further, located within a redevelopment zone for the City, the project secured deferral of a material portion of its impact fees and will enjoy significant public right of way improvements that further catalyze development in the area. Convenient freeway access and proximity to urban employment centers position the project as a premier workforce housing option.
Because the area immediately surrounding the site has not seen large-scale investment for some time, targeting the submarket seemed less obvious to many in the cautious investment community. To translate the vibrancy of Sponsor’s thesis, Fident conducted diligent research of the area comparables and discussed the project and the market with local apartment community managers. Rental stock of a recent vintage falls outside of the immediate submarket, but does offer superior amenities and higher rents. Rental communities more proximate are much older and of inferior construction, and so their rents require significant upward adjustment when compared to this new product. Fident effectively translated the Sponsor’s market insights to investors with a “blend of art and science” that supported their realistic performance assumptions.
The joint venture equity partner, with whom Fident has enjoyed a long relationship, provided the required equity. After a preferred return, profits from the project are split 50/50; the equity partner does, however, enjoy a lookback to correct the profit distributions if their performance drops below a certain threshold. Flexible in their capital allocations, this limited partner seeks investments ranging from $5MM to as large as $50MM. While multifamily is a core focus of the fund, other attractive property types include grocery-anchored retail, office, industrial, residential condos, secondary market malls, and mixed-use assets.
