LOS ANGELES- Pembrook Capital Management LLC has closed just over $5 million in mezzanine financing for Universal Lofts, a 67-unit luxury live/work complex within minutes of Universal Studios and other major entertainment employers here. The company joined with several senior lenders to create a capital package that will allow the Lofts' owners to turn about two-thirds of the units into condominiums.
Constructed in 2008 under the city of Los Angeles's Live/Work Ordinance, which encourages the blending of residential and commercial usage, Universal Lofts consists of nine four-story buildings containing a total of 112,465 square feet used to create 67 townhome-style units. Residences feature private balconies, high ceilings, varied floor plans, quality finishes and garages.
The buildings were originally intended to be a condominium-only project. But the crash of 2008 changed that plan, and the lofts were subsequently rented as apartments. The owners are now changing back to a slightly altered version of the original gameplan, offering condominiums to existing tenants in the building and prospective buyers and keeping about 24 units as apartments.
"We continue to tap into the demand for mezzanine financing on a very selective basis," said Stuart J. Boesky, Pembrook's president and CEO, in a prepared statement. "This investment in Universal Lofts offers the opportunity to finance a successful project developed by an experienced sponsor within a high-demand, high-barrier submarket of Los Angeles. That's exactly the type of opportunity for which Pembrook is looking."
Founded in 2006 by Boesky, Pembrook Capital Management invests in and originates commercial real estate debt to finance all parts of a capital structure, including first mortgages, mezzanine, bridge loans, note financings and preferred equity across the US. The firm invests in most commercial real estate property categories, including multifamily, office, retail and industrial.
Universal Lofts is currently 95% occupied by rental tenants. Pembrook is providing $5.25 million of mezzanine financing to recapitalize the property and to facilitate the sale of units as condominiums. The sponsor plans to sell approximately two-thirds of the units and continue managing the balance as income-producing property.
Chris Simon, the exclusive West Coast correspondent for Pembrook, tells GlobeSt.com that “there was a lot of interest in this transaction. There were definitely a lot of players and it was a competitive process. In this case, the sponsor had a good amount of existing equity. When he went to get senior debt quotes, he needed the piece to fill in that gap (between senior debt and equity). So it was a nice opportunity for us to come in and fill that gap in the project.”
Many production companies rent out the loft space for exclusive work use, while others use them as places for visiting employees to stay. “Probably 50% of the users don't actually live there,” says Simon. “So you have production companies and other people that mostly work within the entertainment industry, given the proximity to studios and Hollywood. The other 50% uses it as home and work. So it was a very intriguing project, given the location and proximity to the different entertainment companies.”
East West Bank funded the senior debt and Dekel Capital provided just over $37 million of bridge and mezzanine debt to the borrower, Cahuenga Pass Development.
As previously reported by GlobeSt.com, the condo market in Los Angeles may be looking up. The first non-recourse loan for a new condo construction project since the crash was closed last month by George Smith Partners.
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