Davies: The greatest challenges with this financing were ensuring that the ground lease structure would ultimately be acceptable to lenders, while also still allowing our client to secure the non-recourse financing structure they were seeking.

In terms of the ground lease, we were successfully able to value the 99-year ground lease structure as being favorable to the actual value of the land. This proved to lenders that the collateral in the project would be valuable enough to warrant the risk they were taking in providing financing at 70% loan to cost.

In regards to the non-recourse requirement, our team was able to leverage several characteristics of the project to demonstrate to lenders the safety in this investment. First, we utilized the strength of the development team, demonstrating their track record of success in similar developments. In addition, the guaranteed maximum contracts executed by the general contractor, added a level of comfort in terms of building costs. And finally the favorable market conditions and positive revenue projections provided the financiers with the level of comfort they needed to ultimately finance this project.

GlobeSt.com: You previously mentioned this development site is one of the final gems in Downtown San Diego. With hospitality now making a comeback, were lenders receptive and competitive in terms of financing this project? How were you able to assemble a capital stack that ultimately provided 70% of the construction costs?

Davies: As this was a truly fantastic development site, we were able to engage a variety of lenders who were interested in financing this project. With that said, ultimately closing this financing was certainly not an easy task. The majority of our work focused on ensuring that the revenue, cost and ground lease underwriting were impeccable, and that they thoroughly demonstrated the value in this project. This underwriting ultimately provided lenders the security needed to allow us to successfully close on the transaction.