LOS ANGELES—Elite Real Estate has secured $21 million in financing to develop a 49-unit 80,000-square-foot multifamily complex in Brentwood. It is the largest development to break ground in the Brentwood market in more than a decade. The construction loan carries an 80% LTC ratio, an unusually high ratio that shows, under the right circumstances, lenders are willing to increase leverage to stay competitive.

In taking quotes from lenders for the loan, Jonathan Lee, SVP at George Smith Partners, who secured the funds on behalf of the borrower, received two quotes from lenders for 80% LTC, which the borrower needed to complete construction. “They run a debt-yield test of the NOI at stabilization, and we were able to argue up to 80% and get them comfortable because the borrower had bought the land at a great basis and there is a lot of value there, even though the loan to cost was relatively high,” Lee tells GlobeSt.com. “The land basis was such that the loan to value was in line with what you would normally see in the market, but the loan to cost was a little bit higher. Additionally, because this was an infill location, they lowered their threshold on the backend.” The loan has a 30-year term at LIBOR plus 2.5 and recourse limited to the top 50% of the loan amount.

The project will break ground this week. Elite Real Estate, which bought the land site three-and-a-half years ago, plans to market the units as for-rent apartments, although the land is also entitled for condominiums, and will hold the property for the long term. The 49-units are a mix of two- and three-bedrooms with an average size of 1,606 square feet, and will feature stainless steel appliances, in-unit washers and dryers and hardwoods floors. Onsite amenities will include a pool, spa and rooftop deck with mountain views. “While the per-door basis is pretty high, it worked because of the rents that they are getting in that submarket,” says Lee about the loan.

The financing was provided through a local money center of a national bank. “This proves that lenders are willing to go to 80%. Money-center banks are really willing to go a little bit higher on loan to cost for deals they feel are safe and with sponsors that they want to work with,” says Lee. “This is especially true for infill submarkets, but with the right basis and the right sponsor, it is achievable.” However, Lee also predicts the market will see other shifts this year. “The winds are shifting a little bit as far as recourse is concerned,” he adds. “This loan was 50% non-recourse, which burns off at stabilization. I think that within the next year, you are going to start seeing full loans at nonrecourse from day one.”