$11,760,000 Construction Financing to Develop a 14 Unit Small Lot Subdivision Project in the Silver Lake Submarket; Los Angeles, CA

Rate: Floating at 1 Month LIBOR + 2.75%
Term: 2 Years with Two (6) Month Extensions
Amortization: Interest Only
LTC: 72.5%
Fees: 1%
Prepayment Penalty: None
Guaranty: Recourse

Transaction Description:

George Smith Partners placed $11,760,000 in ground up construction financing to develop a 14 unit small lot subdivision project in the trendy Silver Lake submarket of Los Angeles, CA. The Project is extremely well located within Silver Lake and is walking distance to Sunset Junction. The per unit exit price is projected to represent a 30%+ discount to the cost of single family residences with similar footprints, offering an affordable alternative in an attractive and supply constrained market. Challenges included a sponsor seeking full leverage but requiring an extremely low interest rate, and many lenders refusing to offer competitive bids (or any bids at all) given the Project’s for-sale exit to homeowners.

GSP secured a capital provider that was comfortable with the Property’s central, urban location and the favorable per unit cost basis relative to both single family homes and the limited number of local competing condominium projects. The loan represents 72.5% of total cost and carries an interest rate of One Month Libor + 2.75%, which is near institutional level pricing for a middle market sponsor. The loan term is 24 months with two six month extensions. It allows for partial release of individual units without a prepayment penalty or exit fee, allowing the Sponsor to sell units at its discretion.

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