Fident Capital secured $26.0MM (63% LTC, 45% LTV) of senior construction debt for an 8-story, 78-unit multifamily development in the Bankers Hill submarket of San Diego, CA. The borrower is a vertically integrated architecture and development partnership that specializes in infill multifamily development in core urban areas of San Diego. The lender that provided the construction loan is a regional bank based out of Minnesota, with several offices throughout the Western US.
The primary challenge of the deal was securing bank financing in a rising interest rate environment, at a time of rapid change in the macro economy. The increased cost of financing across the board led the lender to reduce loan proceeds between the time the term sheet was signed and the time the loan closed. The borrower was left to fill the resulting shortfall gap in the capital stack with equity. Another challenge was that bank underwriting and credit standards have tightened drastically within the past 12 months, particularly for construction lending. Fident helped the borrower navigate the ever-changing bank landscape by actively participating in closing and due diligence discussions between the borrower and the lender.
Despite this, the project’s strengths far outweighed the challenges and Fident was able to attract attention in a challenging capital market landscape by creatively presenting the deal’s strong market fundamentals and unique architectural design as key drivers of rental rates. Bankers Hill is part of a submarket with sub-3% vacancy and with some of the highest multifamily rental rates in the county. Fident conducted several thorough comp analyses to break out potential revenues by unit type to prove out expected net operating income for the project and drive proceeds up as high as possible.
Fident was thrilled to assist with the capitalization of architecturally significant, well-designed housing on a meaningful scale in one of San Diego’s most prestigious neighborhoods. The building will be an asset to the Bankers Hill neighborhood for years to come.
