Fident Capital secured $23.4MM of non-recourse bridge financing for the conversion of a 98-unit, three-story hotel into a multifamily community in Carlsbad, California. The property sits on a 3.12-acre site west of I-5, less than half a mile from the beach. The borrower, a repeat Fident client, is a vertically integrated developer with decades of experience across San Diego County, including a recently completed hotel-to-multifamily conversion in La Mesa. A New York-based private lender provided non-recourse financing at 75% LTC with a 24-month term, two extension options, and a rate stepdown structure that lowers the spread and rate floor 125 basis points once 15% of units are leased.
The assignment’s primary challenge was a ground lease structure of uncommon complexity. The borrower was simultaneously acquiring the leasehold interest from the hotel operator and forming a joint venture with the landowner, who contributed the fee position as LP equity, in two independent bilateral transactions with neither seller contractually tied to the other. When the operator wound down and the landowner demanded a $2MM payment to release the ground lease, the operator filed for bankruptcy. Fident supported the client through court-ordered mediation, helping the mediator understand how the capital structure, land basis, and stakeholder incentives fit together. The bankruptcy resolved in five months and produced a $2MM reduction in the leasehold acquisition price, improving the project’s already attractive cost basis.
Compounding the structural challenge was the discovery that the hotel site and an adjacent parking parcel across the street, long assumed to be separate legal parcels, were in fact one undivided parcel with two unique ground leases. The lender could not obtain title insurance confirming a first-lien position on a parcel that did not yet legally exist. Fident worked with the lender, borrower, and three sets of counsel to structure a solution in which the adjacent parcel served as additional collateral pending a post-close lot line adjustment and ground lease collapse.
Validating pro forma rents for a coastal conversion also proved difficult. Nearly all existing rental inventory in North County’s coastal corridor dates to the 1960s through 1980s, leaving few direct comparables for newly renovated studio and one-bedroom product. Fident assembled a comp set spanning multiple coastal communities to demonstrate the project’s whole-dollar value proposition against both aged product and new construction priced at a significant premium.
Despite the complexity, the project attracted broad lender interest. A 7.01% untrended cap on cost, an all-in basis of roughly $319,000 per unit for a coastal asset west of the freeway, and over 16,000 square feet of interior amenity space plus a pool and pickleball courts anchored the deal’s appeal. The joint venture with the landowner gave the sponsor exceptionally attractive leverage, requiring less than 5% cash equity on a $31.5MM capitalization. Fident is pleased to continue supporting this repeat client in optimizing this capital strcuture and creating long-term value.
