Luxury Townhome Community Rising In La Jolla
An 18-unit townhome community, called Aveline, is rising in La Jolla, thanks to a $16.25M non-recourse construction loan secured by George Street Partners (GSP), an LA-based commercial real estate investment banking firm.
Projects like this are a rarity in La Jolla, says GSP principal Jonathan Lee (snapped here with VP Adam Candler on the roof of a building GSP is financing). “This project will be the first of its kind to come online in the La Jolla submarket in many years,” he tells us. “This market is extremely supply-constrained and competitive, and demand for residential product in this high-end area continues to climb.”
This Class-A residential development, which will deliver luxury homes in the $2M range, is being developed by locally based Silver Street Partners. The firm’s managing director, Hector Calderon, (pictured with his wife, Ashley, and 10-month-old daughter, Sofia), tells us, “In contrast to the older, dated condo projects in the area, the homes we are building will provide the feeling and privacy of a single-family, detached home, with the walkability and convenience of downtown living.” He noted the Aveline community is within an easy walk of downtown La Jolla's restaurants, bars, shopping and the bluffs overlooking Torrey Pines and the Pacific Ocean.
“When this site became available, we jumped at the opportunity to develop a project that we could weave into the existing cultural fabric of the village,” he says. La Jolla Village has gone through cycles over time and was once considered "sleepy," but today it is a thriving center of activity, he says.
In shopping the loan, Jonathan says GSP identified comparable sales to justify the price/SF for lenders, which was a challenge initially. With extensive research that supported the proposed per-unit sale prices, his team (including Adam and SVP and director of research David Stepanchak) ultimately was successful in garneringing the interest of four different lenders and negotiate beneficial terms, he says. Jonathan says this level of lender interest is rare in the current financial market, as construction lenders adapt to a changing regulatory landscape.
“Construction financing continues to evolve, as many banks are trying to make sense of the new regulations that have been set by Basel III and the Dodd-Frank Wall Street Reform and Consumer Protection Act,” he explains. “These regulations have caused relationships between borrowers and lenders to become even more complicated, which increases the importance of a financial intermediary. “
In this case, GSP identified a capital provider active in the greater San Diego market that understood the strength and experience of the borrower and the potential of the development, Jonathan says. Terms of the deal were 65% loan-to-value, with a 24-month term at prime plus 1%, with a 4.75% floor. A construction completion guarantee was provided, but no repayment guarantee.