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| Rendering of planned 51-unit workforce multifamily property, Koreatown district, Los Angeles, CA |
LOS ANGELES, Calif. (August 1, 2018) – George
Smith Partners, one of the nation’s leading
commercial real estate capital advisors, has successfully secured $22.3 million
in financing for the ground-up development of a 51-unit workforce multifamily
property with 3,350 square feet of ground-floor retail in the Koreatown
district of Los Angeles.
The property developer is a joint venture between Index Real Estate Investments, Inc. and Ketter
Construction.
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| Jonathan Lee |
The
financing was arranged by Jonathan Lee and Shahin Yazdi, both Principals and
Managing Directors of George Smith Partners.
“Development
in Koreatown is booming, presenting both advantages and challenges for property
owners,” says Lee. “As experienced developers, the Index Real
Estate/Ketter Construction partnership recognizes the demand drivers in this
neighborhood, including the opportunity to deliver a property that will attract
consistent renter demand from people who are priced out of more expensive LA
submarkets.”
The
current challenge for owners and developers is high competition for financing,
according to Yazdi.
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| Shahin Yazdi |
A
recent report from
JLL cited 34 developments that are underway in Koreatown, contributing
approximately 3,000 housing units, 474 hotel rooms and 380,000 square feet of
retail in the years ahead.
“With
so much construction in the market, borrowers must be prepared for creative
solutions to compete for competitive debt,” says Yazdi. “In this case we were
able to achieve financing for 89 percent of the project cost by bifurcating the
loan structure. This strategy enabled us to achieve competitive terms among
several finance sources.”
George
Smith Partners structured the financing as an A/B execution, with a senior
lender that was willing to advance up to 75 percent of cost subject to a 65 percent valuation upon stabilization.
The team layered on a $5,000,000 mezzanine tranche and negotiated a partial
deferral of the development fee to round out the capital stack.
The
$17.3 million senior loan was priced at LIBOR plus 375 and a half-point for the
36-month term. The $5 million tranche was priced at 12.25 percent annual.
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| Pablo Kupersmid |
The
new development, located at 3057 W. Pico in Los Angeles, will be Index Real
Estate and Ketter Construction’s second development in the Koreatown district
in recent years. The partnership also developed a 40-unit for-sale condominium
project on Harvard Blvd. and 11th Street.
At
3057 W. Pico, the partnership is focused on offering high-quality housing at
rental rates that are reasonably affordable when compared to nearby LA
submarkets, according to Pablo Kupersmid, Principal of Index Real Estate
Investments, Inc.
“This
is a prime location in a dense urban area with a tremendous need for housing,”
says Kupersmid. “We are taking a thoughtful approach to ensure the development
is well-aligned with the needs of the local market. For that reason, this will
not be a luxury product.
"Rather, the property will provide quality housing with
on-site amenities, including ground-floor retail, an open community space and a
fitness center, without over-amenitizing - making it a perfect fit for workers
in the region.”
The
property is in close proximity to a wide variety of employment, retail,
entertainment, and transit options.
Construction
is underway on the development, with an anticipated completion date in early
2020.
For more information, please contact:
Lindsay Mackay/Jenn Quader
(949) 955-7940
