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October 23, 2018
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New Res Project in L.A.’s Koreatown Lands $22 Mil in Financing

8/07/18

A joint venture between Index Real Estate Investments Inc and Ketter Construction has secured $22.3 mil in financing for the ground-up development of a 51-unit workforce multifamily property with 3.4k sf of ground-floor retail in the Koreatown district of Los Angeles. Construction is already underway on the development, with an anticipated completion date in early 2020.

The project, located at 3057 W. Pico Blvd, just east of Western Ave, is not being developed as a luxury product. Rather, 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. 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 good match for workers in the region.

Jonathan Lee and Shahin Yazdi with George Smith Partners arranged the financing. The $17.3 mil senior loan was priced at LIBOR plus 375 and a half-point for the 36-month term. The $5 mil tranche was priced at 12.25% annual.

The current challenge for owners and developers in the area is high competition for financing, according to Yazdi. A recent report from JLL cited 34 developments that are underway in Koreatown, contributing approximately 3,000 housing units, 474 hotel rooms and 380k sf 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% 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% of cost subject to a 65% valuation upon stabilization. The team layered on a $5 mil mezzanine tranche and negotiated a partial deferral of the development fee to round out the capital stack.





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