BEVERLY HILLS, CA—GPI Cos. has secured a $23.2 million loan for a development site located at 9908 Santa Monica Blvd. in Beverly Hills. The 36,000-square foot raw land site formerly housed the Friar's Club, but is currently vacant and zoned for retail or office use. The loan has a three-year term with a floating rate and was funded through Cornerstone Real Estate Advisors.

The HFF debt placement team of senior managing director Kevin MacKenzie and associate directors Greg Brown and Jeff Sause secured the funds on behalf of the borrower. The team declined to comment on the transaction or on the market; however, we spoke to David Rifkind, principal and managing director at George Smith Partners and a capital markets expert. He was not involved in this deal, but talked to us about capital markets trends for development projects, explaining that lenders are increasingly looking to fund projects in high barrier-to-entry markets.

“Lenders are very interested in funding development projects, especially commercial and mixed-use developments, in high-barrier markets like Beverly Hills, West Hollywood and Santa Monica,” Rifkind tells GlobeSt.com. “It is difficult to build in these cities. There is very little new supply in the pipeline. Investment properties in these markets outperform their regional peers. They are more stable in a downturn and they recover faster in an upturn. If a developer has a well-conceived project, the right land basis, and has completed the discretionary planning process, lenders will compete aggressively to fund the construction loan.”

The development property is located at a main-and-main location in Beverly Hills. It is on the Southwest corner of Santa Monica Boulevard and Charleville Boulevard, and is across the street from the Beverly Hilton and Peninsula Beverly Hills Hotel. Additionally, the project is adjacent to the former Robinson's May department store, which was purchased last year by the Wanda Group for $400 million. The Asian developer, who beat out 10 other foreign investors for the site, plans to build a $1.2 billion mixed-use development. The proximity to these sites only adds additional value to this development.

Lender demand for these types of projects is so high that many lenders have begun making some pretty significant concessions to win deals. “The trends we are seeing in higher balance construction loans in supply constrained markets like west Los Angeles include allowance for a higher degree of “spec” space by lenders and the prevalence of structured construction loans that include a mezzanine loan that take the total loan-to-cost to 85% or higher,” says Rifkind. “These features are only present in very strong markets.”