Lenders are conservative inthe underwriting on new construction multifamily projects, and ithas made securing financing a challenge. While multifamily is afavored asset class among commercial real estate sectors, lendersare conservative on loan-to-cost leverage versus loan-to-value.Continental Partners recently secured constructionrefinancing for two new construction projects in Los Angeles, andbrokers on the deal said that while there are challenges, lendersare still active.

“One of the more difficult jobs that we have in the marketplaceis securing non-recourse debt on a property that has no collectionhistory,” J.M. Grimaldi, EVP at ContinentalPartners, tells GlobeSt.com. “It isn't that money is harder toaccess in today's marketplace, but rather that painting a picturefor a property that doesn't have performance history is an uphillbattle.”

The two new construction deals include cash-out constructionrefinancing for a class-A, 18,400 square-foot multifamily propertyin South Los Angeles, and a cash-out refinancing for an 8-unitmultifamily property located in East Hollywood. Securing theleverage borrowers needed was among the challenges on these deals.“Lender feedback was solid. We were able to pinpoint a lender thatwas able to look at the market value of the land instead of whatthey paid for it to help increase the loan amount,” BrianAsheghian, an associate at Continental Partners, tells GlobeSt.com.“We did get lenders interested, but it was a challenge to findlenders that would step up and only offer non-recourse and look atthe deal based on loan-to-value rather than loan-to-cost.”