$16,250,000 Non-Recourse Ground-Up Townhome Construction Financing to 65% of Cost

Transaction Description: George Smith Partners structured the non-recourse ground-up construction financing for 18 luxury townhomes in the La Jolla Village neighborhood of San Diego. Designed to fulfil the demand for Class-A residential product, the townhome style development is centrally located in the heart of La Jolla and is only a few blocks from restaurants, shopping and the bluffs overlooking Torrey Pines and the Pacific Ocean. Sized to 65% of total development cost, the 24 month loan is priced at PRIME + 1.00% with a floor of 4.75%. A construction completion guarantee was provided although there is no repayment guarantee.

Challenge: The residential market in the area is extremely strong, but there is negligible velocity to provide new product comparables. Cash equity was not fully funded at recordation.

Solution: Market research was conducted to support sales prices per square foot from the limited residential trades that did execute. Demographics and asset quality supported larger unit footprints and thus the higher “all-in” exit prices. Our capital provider is active in this greater market area and is comfortable with the sell-out analysis. The Sponsor strength and experience in this product added additional comfort and allowed the Lender and Sponsor to fund the remainder of cash equity dollar-for-dollar, simultaneously with construction draws.

Related Financings