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A covenanted affordable housing project in Koreatown can break ground this month after receiving $24.4M in financing secured by Colliers Mortgage Structured Finance Group.
The Kingsley Apartments is a 136-unit apartment building where rents will be priced at 80% of area median income. The studio and one-bedroom project will feature some parking, but less than one space per unit.
The project tapped into Mayor Karen Bass' Executive Directive 1 to expedite approvals on fully affordable projects. Developers plan to break ground this month, about a year after filing the initial application and about eight months after the project was approved, planning department records show.
That short of a timeline "is really unheard of," Lee said, adding that normally it takes 18 to 24 months for a market-rate deal to get to groundbreaking.
Planning records list the developer as Saman Kerendian. Kerendian has two ED 1 projects approved in the 900 block of South Kingsley Drive in Koreatown. Both have 136 units. Kerendian had previously submitted plans at one address for a smaller multifamily project at one of the Kingsley addresses that is now an approved ED 1 project.
Colliers Structured Finance Group Executive Managing Directors Jonathan Lee and Shahin Yazdi along with William Hyatt and Tommy Adelson locked in the financing, which has a 30-month term with optional extensions and a rate of the secured overnight financing rate plus 2.41%, Colliers announced.
During the process to find financing for the project, several banks felt it was too early to lend to an ED 1 project, or offered terms in the 50%-60% loan-to-cost range, Colliers' Lee said. The financing that the Kingsley secured is 75% loan-to-cost.
"Ultimately, we found a lender who understood the program and provided competitive terms and leverage," Lee said. While he did not disclose the identity of the lender, he did say that regional banks and community development financial institutions are generally comfortable with these projects.
The project's location in transit-rich Koreatown also played a role in its ability to solicit bids and ultimately find financing, Lee said. Lenders are more apprehensive about ED 1 projects – which do not require parking and often have reduced amounts of it – that are in more car-dependent areas of the city.
"You don't need a car in K-town," Lee said.
Lee expects that seeing more ED 1 projects completed and stabilized will change attitudes about these projects.
"Once other lenders see this ED1 project get paid off in full with a permanent loan, then they'll get very comfortable with lending on this product," Lee said.
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