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George Smith Partners Arranges $30 Mil for Three Res Developments in LA’s Koreatown Neighborhood

6/12/15

George Smith Partners (GSP) recently arranged $30.7 mil in construction financing for three separate multifamily developments, all within the Koreatown neighborhood of Los Angeles. The deals were arranged by GSP Principal Jonathan Lee and Assistant Vice President Adam Candler.

“Koreatown has proven to be one of the most active markets in terms of new product within the City of Los Angeles,” explained Lee. “Because of its central location to Downtown, Hollywood and the Westside, the absence of anti-development neighborhood groups – common in other neighborhoods, and the Metro and Metro subway extension currently underway, Koreatown is re-establishing itself in the market as a neighborhood where development can be done.”

833 S. Harvard, Los Angeles
833 S. Harvard, Los Angeles
One of the three financings is a $14.5 mil construction loan, secured for the development of a 65-unit, for-rent apartment community located at 833 Harvard Blvd. The developer, Elite Real Estate, purchased three adjacent parcels and then entitled the land assemblage to create one multifamily project.

Because of the value created through the entitlement, GSP had to navigate lender’s High Volatility Commercial Real Estate (HVCRE) requirements as it pertains to Basel III. The new HVCRE regulations require borrowers to have 15 percent cash equity at the completion of a project. The loan was ultimately financed at 80 percent loan-to-cost (LTC) priced at LIBOR +265.

In another transaction, GSP arranged $13 mil in construction financing on behalf of Index Realty for the development of a 40-unit, for-sale condominium project. The financing includes both debt and equity, with an $11.8 mil construction loan secured from a local bank, as well as $1.2 mil in preferred equity from a crowdsourcing firm.

The bank provided 75 percent LTC on the construction loan while the preferred equity lender took the total project capitalization to 81 percent. The preferred equity came from a crowdfunding company and is believed to be the first ground-up, for-sale condo project financed through crowdfunding. The blended cost of capital for the entire project is 6.25 percent. The 40-unit development is set to break ground in June 2015, and is located at 1101 South Harvard Blvd in the City of Los Angeles.

The third deal was a $3.2 mil construction loan on behalf of Elite Real Estate for the construction of a 12-unit, for-sale condominium project. The 75 percent LTC financing came in at a very low 3.25 percent interest rate. The condo development is located at 305 South Ardmore Ave, north of Wilshire Blvd and a block west of Normandie Ave.






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