LA Viper Room's New Home Demonstrates What Lenders Like About Mixed-Use

Securing financing for mixed-use projects has long been a complex puzzle. Underwriting the various property types and their risks and revenue streams complicates the typical financing mechanisms used in commercial real estate and can keep some lenders away.

But as CRE has shifted in recent years, including multiple uses can be seen as a hedge in an uncertain economy. A new predevelopment loan issued for a hotel, multifamily and entertainment project on Los Angeles’ Sunset Strip illustrates how a variety of uses can bring in interest.

The project at 8850 Sunset Blvd. will create a new home for the city’s famed Viper Room in addition to the residential and hospitality components. Centennial Bank and Crestline Investors lent $71M for the development.

“You combine all of those [uses] together and that's what really drove a lot of the demand,” said Blake Thompson, vice chairman in Newmark's global debt and structured finance business.

Thompson, along with Newmark co-President of Global Debt and Structured Finance Jonathan Firestone, arranged the financing on behalf of 8850 Sunset’s developer, Arizona-based Silver Creek Development. 

The financing came in at a key juncture. In late May, the marquee project was in default on a loan and owed $69M to its lender, which had begun the foreclosure process. 

But by early July, the project was back on track, having secured the new financing in the form of a private credit vehicle, with the help of Newmark. 

Mixed-use projects are “facing a combination of cyclical and secular challenges that range from rising costs to changing demographics,” the Urban Land Institute reported last year. 

Before the pandemic, office buildings were common anchors for these projects, but the shift to hybrid work has turned that on its head, ULI said.  

Right now, most of the interest from construction lenders is either on multifamily or industrial projects, Thompson said. For anything outside of those two asset classes, “the bar is high.”

At 8850 Sunset, the combination of hotel, multifamily and a recognizable venue was an advantage, Thompson said. 

The development will also have a lot of billboard space, both digital and analog — 2,000 feet of digital signage alone, according to documents filed with the city of West Hollywood — which Thompson said will also be an income contributor for the project. The diversity of income streams for the property made it all the more attractive to lenders in this case. 

Silver Creek Development expects to pull permits for the fully entitled project in the next 12 to 18 months. 

“There is a lot of pressure on construction projects right now, and getting them capitalized is not easy in the current environment,” Thompson said. 

Upward pressure on labor and construction costs, plus uncertainty about tariff and immigration policies and how they will ultimately impact the cost of building, is hanging over deals, Thompson said.

Construction projects have also faced growing delays and even cancellations amid both rising construction costs and uncertainty around the outcome of tariff deliberations. 

These factors all make it hard for construction financing deals to get done. But there are certainly exceptions.

“There's not construction money for every transaction right now, but for the transactions that check every box, there's a deep bench of lenders that are willing to put their money out and deploy their capital,” Thompson said.

The 11-story project sits on Sunset Boulevard near the eastern edge of the city of West Hollywood. It will include a 90-room, 4.5-star hotel, five restaurants, 78 apartments and a new space for the nightclub The Viper Room, which would be demolished to make way for the new development. It received entitlements from the city in August 2024. 

Having its entitlements in hand likely played a large role in lenders' interest in the project, as it eliminates a lot of the uncertainty that many in commercial real estate considered par for the course in California and the Los Angeles region.

There was a fair amount of competition for the site. Silver Creek’s project received between five and 10 proposals from banks, private credit vehicles and debt funds. 

Centennial and Crestline’s winning bid for the project included both senior and mezzanine debt, respectively, but Thompson declined to provide details on the financing breakdown between the two types of debt or details on the terms of the deal. 

Thompson said banks have generally been increasingly active on the lending front over the past few months. 

“To see them show up — on other transactions, on this transaction, and even for a lot of the office loans that we're getting done right now — is really encouraging,” Thompson said. “It just adds more liquidity into the space. It puts pressure on spreads to come down across all different lender types, which, at the end of the day, is a benefit for borrowers.”