GSP arranged the financing for the ground-up development of 63 “For-Sale” townhomes in the Silver Lake neighborhood of Los Angeles. The property was purchased all cash by a joint venture between an established local developer and an equity fund. The acquisition of the vacant property included full entitlements and a ready-to-pull grading permit. The construction drawings were finalized post-close. The non-recourse construction loan was sized to 50% of total project cost.
Challenge: Neither of the joint venture partners were able to guarantee the construction loan or offer a “warm body” for the completion guarantee. The developer had yet to re-establish a building track record since the beginning of the recession in 2007.
Solution:GSP identified a lender that understood the cache of Silver Lake and the demonstrated demand created by the local public schools and their impact on home prices. GSP negotiated a completion guaranty exclusively from the equity fund and limited the completion guarantee to the entity level. To mitigate cost over-run concerns, GSP had the Borrower establish a dedicated cash account with an initial funding of 8% of the loan amount. The funds are available for cost overruns and will be released at certificate of occupancy.
