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November 17, 2018
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Oakland Apartment Development Recapitalized with $44 Mil in Joint-Venture Equity and Debt

11/01/18

Holliday Development has recapitalized The Union, a 110-unit apartment development located in an opportunity zone adjacent to the West Oakland BART Station, with $44 mil that was arranged by Highland Realty Capital. The funding, consisting of $18 mil of joint-venture equity from New York Life Real Estate Investors and $26 mil of debt from City National Bank, will finance the vertical development of the project, which will also include 3k sf of ground floor retail.

The units will be built off-site via Factory_OS, located on Mare Island in Vallejo, which is also in an opportunity zone. Facotry_OS, or “The Factory”, began operations this year as a 100% union-employed facility, making it the only viable option for developers who want to build off-site, but have a prevailing wage requirement. New York Life Investors was the natural fit for this project, as the firm is an investment manager for union pension funds.

Building the units off-site will condense the construction timeframe down to approximately 12 months, 8-12 months less than typical timeframes. The shortened construction period reduced the loan interest reserve requirement, along with other time-sensitive capitalized costs, thereby increasing the yield and potential returns on this investment. Most importantly, the risk of the investment is significantly reduced by putting the construction process under one roof, removing externalities such as weather, traffic, and other onsite hazards. On a risk-adjusted basis, this development offered double the return of normal apartment projects.

Brett Mlinarich led the Highland advisory team. The opportunity received tremendous interest from a wide array of institutional investors and lenders. However, the off-site nature of the construction process ruled out the majority of players.




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