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August 22, 2017
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New Res Development in LA’s Silver Lake Neighborhood Receives $21.6 Mil in Construction Money

7/25/17

A joint venture between Barth Partners and Barry Leddy Developments has obtained $21.6 mil in ground-up construction financing for development of a 35-unit res condo project in LA’s Silver Lake neighborhood. The financing was arranged by George Smith Partners (GSP).

Located at the junction of Sunset Blvd and Micheltorena Ave, and a few blocks from the iconic Sunset Junction, the mid-rise condominium will include 2k sf of ground-floor retail space designed for restaurant use, offering residents additional dining options. The project will also feature community amenities including a resort-style pool and spa, meditation garden, state-of-the-art gym, conference rooms for residents who work from home, and a rooftop deck overlooking downtown LA and the Griffith Park Observatory.

Given the high cost of single-family housing in Los Angeles, the development will provide new homebuyers with a more accessible option to own in this submarket. Per-square-foot prices for homes in Silver Lake jumped 20 percent in the last year, and the few for-sale condo units that have become available have sold out quickly, making these new residences an attractive alternative for buyers, according to Justin Barth, Founder of Barth Partners.

GSP’s Jonathan Lee arranged the non-recourse construction loan with a completion guarantee from an off-shore investor. Sized to 80% of costs, the loan is priced at 10% for a two-year term, and includes two 6-month options to extend.

Silver Lake’s access to employment centers, availability of mass-transit options, and proximity to downtown Los Angeles have attracted an influx of Millennials seeking housing options near neighboring amenities. Lee notes that walkability is a key component of urban development, and points to an ongoing correlation between walkability and increased property values in metro markets throughout the U.S.

“This property’s irreplaceable urban-infill location made it an attractive project to finance,” adds Lee. “The challenge, however, was getting lenders comfortable with the sale prices. No new condo construction has been completed in Silver Lake recently, and as such, unit sale comps do not exist. To overcome this challenge, we provided a number of unit sale comps in Downtown Los Angeles and Hollywood, which far outpriced our sponsor’s proforma. The asset’s proximity to these markets enabled the lender’s credit group to accept the out-of-submarket sale comps in its valuation.”




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