Fident Capital secured a $31.3MM construction loan for the development of an 87-unit multifamily project in National City, just south of Downtown San Diego. The borrower, a repeat Fident client, is an experienced owner-developer with a strong track record of building successful multifamily projects in the greater San Diego area, particularly within the National City submarket. Although Fident originally set out to procure both debt and equity – and successfully secured multiple bids for both (including 7 equity bids) – the optimal solution ended up being a stretch-senior construction loan that provided the borrower with their entire ask, at a sizing of 94% LTC. The lender was a private debt fund based out of Southern California.
The deal included a complicated acquisition story involving a partnership buyout where the borrower received the land as an in-kind distribution. This proved to be a primary challenge of the financing, requiring considerable additional explanation for capital sources, and causing the land basis and project cost figures to be more difficult to quantify. Another challenge was the borrower, who was self-performing as the project’s general contractor, was not working under a GMP contract, and did not pursue bonding. This situation required special attention from interested capital sources, increasing their scrutiny of the deal and its guarantors, which in turn provided additional questions to address as the deal was marketed. A final challenge of the financing was navigating various delays related to third party reports in a volatile (and rising) cost environment. By using our deep knowledge of the intricacies of the closing, as well as by adding value in an intermediary role through the careful management of third parties, Fident Capital helped mitigate execution risk and push the financing to an expedient close.
In addition to helping the borrowers navigate the deal’s complexities and challenges, Fident captured the attention of capital and yielded numerous offers in a challenging capital markets environment. Chief among the deal’s strengths were National City’s favorable workforce housing demographics, which largely stem from its location next to two major military bases. The project also enjoyed an attractive land basis and by-right entitlements. Fident emphasized the sponsor’s long-standing, successful track record in developing multifamily product within National City and provided in-depth market research to support the deal’s underwriting assumptions. The marketing materials focused particular attention on the owner-builder’s expertise with cost-effective building design, illustrating to potential capital sources the solidity of their business plan and their mastery of the notoriously risk-laden construction process.
Despite the project’s myriad challenges, Fident’s marketing of the high-quality sponsorship, the owner-builder’s proficiency with cost control and design, and the favorable demographics of the gentrifying National City market provided our client with an array of choices for the project’s financing. Fident secured financing that exceeded the client’s expectations and ended up being highly accretive to the project’s returns.