LOS ANGELES—George Smith Partners has completed three construction loans in the Koreatown submarket totaling $30.7 million. The loans will fund the construction of three separate development projects, one for-rent apartment community and two for-sale condo communities. Although the leverage on the three loans ranges from 75% to 81%, banks would only leverage as high as 75% on the condo properties.

“Banks are more comfortable with the for-rent projects. The rental market is really easy to prove up because there is a lot of demand and a lot of banks chasing limited deals. There are also a lot of exits for the rental market—Fannie Mae, CMBS, and so on, will take out an apartment loan once it is stabilized,” Jonathan Lee, a principal at George Smith Partners, tells GlobeSt.com. “On the condo side, the challenge is that you have to believe you will have multiple buyers. In this case, what helped get people over the hump is that you can't buy a new product for $500,000 at 1,100 square feet. So, the thinking is that there will be demand, but because no new condos have been built recently, there are no comps. There is still hesitation for banks to push through to 80% leverage on a condo deal.” Lee secured the funds on behalf of each of the borrowers.

The for-sale apartment development is located at 833 S. Harvard Blvd., and is a 65-unit project from Elite Real Estate. The developer assembled three adjacent single-family land parcels for the project, and entitled the property for multifamily development. Elite Real Estate received a $14.5 million construction loan at 80% leverage. “We went to market and actually got a couple of quotes at 80% leverage,” says Lee. “The apartment market there is really strong.”

Elite Real Estate is also developing one of the condo projects, a 12-unit complex located at 305 S. Ardmore Ave. The borrower secured $3.2 million in construction financing for the project at a very low interest rate of 3.25%. The project has 75% leverage.

Index Realty secured a total of $13 million in construction financing to develop a 40-unit for-sale condo property, located at 1101 S. Harvard Blvd. The borrower, however, was only able to secure 75% leverage, a total of $11.8 million from a bank. “The condo comps that are available right now are 2007 and 2008 vintage, so we had to argue higher pricing and eventually found a bank that would do 75% leverage,” says Lee. Lee secured the additional $1.2 million through a crowdfunding site, which brought the leverage up to 81%. The blended capital cost for the project is 6.25%. The project will break ground this month.

“Koreatown is in a really unique position. A lot of developers are going there because the land is relatively cheap compared to other areas of the city,” says Lee. “You can get a lot of demand and the price point is lower, so it attracts more buyers and renters. Koreatown is sort of that last little pocket that hasn't jumped up as high as everyone else has.” Of course, the submarket has also been a hotspot for value-add investors, with several investors buying up older multifamily product and performing extensive capital improvement programs.