$32,000,000 Construction Loan and $9,000,000 LP Equity for the Development of a For-Sale Residential Project; Hayward, CA

Transaction Description:

George Smith Partners placed a $45,000,000 construction loan and advised on $10,200,000 of LP equity for the first phase of a for-sale residential project in Silicon Valley, California with a repeat sponsor. The Project will be built in two phases. This first phase will have 50 townhomes providing much needed workforce housing to the area. The Project will also have some affordable units for sale.

GSP executed an effective and in-depth marketing campaign to help the capital markets understand the opportunity appropriately while finding solutions to various challenges that arose during the entire process. GSP marketed and highlighted the Project’s strength, the phasing nature of the build schedule, the projected sales prices and the forecasted upward trajectory in both sales price growth and sales pace growth. GSP was able to source capital providers on the Project that were comfortable with both the depth and experience of the Sponsor as well as believe in the continued growth of the Bay Area.

Ultimately, the professionalism and expertise of GSP on the deal coupled with the proficiency and extensive experience of the Sponsor allowed for a successful close.

Transaction Description:

George Smith Partners successfully placed $39,000,000 in construction debt and advised on $20,000,000 Limited Partner equity for the ground up construction of 137-unit mixed-use development with ground floor retail in Midtown Sacramento, CA. The Project is the second asset that GSP has structured both debt and equity for a sequence of planned multifamily developments. Pricing for the non-recourse construction loan tightened from the first transaction six months ago.

The site will be developed into a seven-story building consisting of six levels of rental units, parking, and ground floor retail. Situated in Midtown, Sacramento’s trendiest neighborhood, the Property is walking distance to restaurants, shops and is conveniently positioned near the rail station and a local highway. The area has increasingly attracted significant public and private investment due to its proximity to employment hubs and lifestyle amenities.

The capital markets were weary of ongoing supply chain and increasing construction costs. GSP worked with the Lender and equity investor to structure contingency levels that were acceptable to both. The Sponsor was provided with competitive, non-recourse construction loan and an investor that could grow with their future development needs.

Transaction Description:

George Smith Partners advised on $14,000,000 in Joint Venture QOZ (Qualified Opportunity Zone) Equity Financing and $23,000,000 in non-recourse senior construction financing for the ground-up development of a 127 unit multifamily property in Vancouver, Washington, a suburb of Portland, Oregon. The Property sits across the street from the Vancouver Waterfront, which is undergoing a $1.5B dollar public/private master plan redevelopment. The 6-story, 173,000 square foot property will feature a landscaped third floor courtyard, a community room, balconies, two levels of parking, bike storage and excellent views of the Columbia River and Mount Hood.

Challenges:

Due to of the Project’s location in a QOZ, the Sponsor sought a QOZ financing partner who had the ability to place capital for the required 10-year horizon as per the QOZ guidelines. Moreover, many capital sources also expressed reservations related to supply concerns in the greater Portland market.

Solutions:

GSP focused on the Vancouver submarket’s strengths, including very limited new supply in contrast to downtown Portland, no state income tax, the more relaxed lifestyle, the proximity to PDX airport, and the Project’s location in very close proximity to the waterfront. Additionally, GSP highlighted the Sponsor’s ability to execute by showcasing its recent Class A multifamily delivery in Vancouver that fielded a large number of offers and traded at a record low cap rate. Ultimately, an opportunity zone JV Equity financing partner was selected who recognized the strength of the location and Sponsor’s best-in-class development history. These attributes also resulted in GSP securing non-recourse construction financing at 60% loan to cost with an interest rate of 1 Month Libor + 3.65%.