Multifamily

GSP arranged $39,450,000 in first mortgage debt and $8,775,000 in preferred equity for the ground-up construction of a 349 unit Class A Los Angeles apartment campus. The total capitalization represents 93% of budgeted cost. Although Sponsor cash was limited to 7% of the capital stack, the non-recourse Preferred Equity has a fixed coupon and does not participate in the “upside” and does not carry a requirement to sell upon stabilization. The limited recourse on the senior tranche burns down at Certificate of Occupancy while the interest rate steps down upon obtaining DCR hurtles. Challenge:The project will be the first institutional sized community constructed in this market in the last 20 years. Demand for new upscale product is untested. Although the Sponsors have experience at prior companies, this is only their second independent development as principals. Solution: GSP stressed the project’s competitive land basis attributable to long term options by the Sponsor and value added through the entitlement process. The low basis made the capital providers more comfortable with the untested market as return hurdles are more easily achievable. The Sponsor assembled a best-in-class project team to provide design and construction expertise.