$2,750,000 Non-Recourse Subdivision Construction Loan in Echo Park, Los Angeles, California

Transaction Description:  George Smith Partners successfully placed the financing to construct a seven-unit lot subdivision in Echo Park a Los Angeles suburb. The Sponsor purchased the land and began the entitlement process in March 2013. The project was designed as an alternative to older, more expensive detached single-family product common to this submarket. The non-recourse loan is funded to 85% of total project cost priced at Prime plus 2.5%, subject to a 6.5% floor. There is no profit participation at this leveraged level.

Challenge: The Borrower was a first time builder who required non-recourse financing at a high advance rate. While the Echo Park stigma is rapidly diminishing, several capital providers do not yet consider this market as viable on a long-term basis.

Solution: Mr. Lee recently financed several housing transactions in the immediate area. His recent tombstones and market information demonstrated real demand for additional affordable product so close to downtown Los Angeles. Although a non-recourse loan, GSP featured the financial strengths of the Borrower and his GC to offer assurances that the business plan would execute as prescribed.