Transaction Overview
Jonathan Lee and Adam Candler arranged the ground-up construction financing for a 40 unit For-Sale condominium development in the Koreatown sub-market of Los Angeles. Sized to 82% of cost, the total capitalization consists of an $11,800,000 senior bank loan at 75% LTC; and $1,200,000 of preferred equity sourced from a real estate crowdfunding entity. The 75% LTC senior loan is priced at 5.25%, and the preferred equity blended the all-in interest rate to 6.25%. Personal recourse is limited to the senior lender.
Challenge: There has been little recent condo construction in this market since the last real estate cycle. Demand for high-quality For-Sale housing could not be proven through sale comparables. The Sponsor requested a leverage point above what is typically offered by a single financing source.
Solution: Market research was conducted to support the economic and demographic fundamentals for the area. Located near restaurants, entertainment and Metro access to major employment centers contributed to anticipated demand. Recent SFR sales and hiring velocity in local employment sectors were major contributors to the narrative. To bridge the capital stack, GSP sourced preferred equity financing from a real estate crowdfunding entity; a pioneering structure that is believed to be the first of its kind for ground-up condominiums. Funding for this portion of the capital stack is sourced online. This project generated a substantial amount of traffic and interest from crowdfunding investors.
