Fident Capital secured $2.87MM of joint venture equity for the acquisition, entitlement, and development of a 21-unit residential townhome project in the desirable Bankers Hill area of San Diego, California. A San Diego-based private equity group, focused primarily on opportunistic residential projects, provided the equity funding. This equity investment balances the capital stack with a $9.2MM construction loan provided by a Southern California bank providing 75% loan to cost.
Located in an excellent infill location directly across from Balboa Park, this infill site encompasses one half of a city block and boasts views of both the San Diego skyline and the harbor. Units offer 2 bedrooms plus a den and 2.5 baths along with 2-car garages in either 3 or 4 story options. Most units feature roof top decks with panoramic views. Averaging around 1,500 square feet, projected pricing for the project ranges from the low $600s to mid $800s.
Despite the project’s incredible location, the site is directly underneath the flight path of San Diego International Airport; a significant negative that many Bankers Hill residents must reconcile. Fident, along with a third-party research provider, worked tirelessly to demonstrate supportive pricing. Fident pointed to developers that have offered similar product with pricing that reflects the flight path impact and found considerable success over the last 2 decades. Furthermore, much of the newer product coming online will price over $1MM, and in some cases at $1,000 per square foot, making the project comparatively affordable. Lastly, Fident illuminated that given the caliber of the Sponsor’s construction, the noise impact inside units register very low decibel levels from the overhead flights.
Entitlement for the project was also a challenge. The site had two zones and proposed unit count triggered a higher level of City scrutiny. While the Sponsor’s expertise ensured a smooth approval process, community oversight groups expressed concern over certain elements of the project and delayed the process. Working patiently with these advocates, the Sponsor gained approval for the project as originally designed. With the desired density approved, the pro forma is on target to generate attractive opportunistic level returns to the equity partner.