Transaction Overview
George Smith Partners placed a $41,100,000 Non-Recourse, stretch senior construction loan for the ground-up development of a 6-story micro unit/co-living project in Hollywood, California. When complete, the Project will consist of 180 fully furnished, all-inclusive micro units within 49 pods with an average micro unit size of 276 sf. The Project lies in an Opportunity Zone.
Several hurdles presented themselves such as concerns about the newness of the asset class and the availability of direct comparable properties. Also, the Sponsor had already begun excavation & shoring work which created challenges in obtaining full title insurance coverage.
GSP focused on the Project’s per micro unit price rather than a per pod price to get the Lender comfortable with comparable projects. Further attention was given to the Project’s affordability as each micro unit comes fully furnished with an all-inclusive rental rate. GSP also stressed the Project’s unparalleled location, walkability to every major amenity in Los Angeles, the number of local employer hubs, and significant demand drivers from transient tenants looking for fully furnished offerings. GSP worked with the title company to successfully resolve all title insurance challenges that were presented and executing a high-profile marketing campaign to ensure that the capital markets appropriately understood the unique asset type. The process also included structuring and marketing the deal with several different capital stack variations (including a concurrent separate marketing effort for an A/B structure) to find the best financing option for the transaction. These efforts resulted in a successfully expedited process with a close in approximately 45 days from entering application.
