Beverly Hills – High Leverage $20,000,000 Construction Loan on Luxury Condominiums

George Smith Partners successfully arranged a $20,000,000 construction loan for a luxury condominium project in Beverly Hills. Since the borrower had owned the land for over two decades, most of the equity in the transaction was from imputed land value.  As a result, banks were not able to get to the requested loan amount as it did not meet HVCRE requirement which requires 15% or more cash equity in the project.  Banks were also constraining LTV by underwriting sales prices lower than the Sponsor’s pro forma sales prices. Since the Sponsor intends to compete at the top of the market, many lenders were unable to recognize the demand for the luxury segment.  GSP was able to locate a private lender that was able to lend 75% of project cost which required minimal additional equity from the Sponsor.  Although the rate was higher than a bank, the length of the term was relatively short due to the business plan to sell out the condos.  The Sponsor decided to take a higher loan amount and invest the additional capital in future projects.