Panoramic Interests has secured $104 million through a construction take-out loan to finance the lease-up period of City Gardens, a new construction class-A apartment building in San Francisco. While the investor ultimately secured the three-year, floating-rate loan through Ready Capital, the financing was challenging to obtain due to the rapid market dislocation brought on by the pandemic.
"Market conditions when we launched the offering in late summer 2020 were particularly challenging in San Francisco," Alex Witt, managing director at JLL, tells GlobeSt.com. "Concern over a second COVID-19 wave and a hypothetical exodus from San Francisco was at its highest point. It has been rewarding to see these fears subside as the Bay area's rents have started to rebound." Witt secured the financing on behalf of the borrower along with senior managing director Charles Halladay and managing director Jordan Angel, associate Jonah Aelyon and analyst Lauren Mezzanotte.
Like most deals during the pandemic, the quality of the sponsor and the property helped close the deal. "Lenders drew comfort from the sponsor's past local experience in successfully leasing up similar assets, as well as the value offering of the units," says Witt. "Panoramic meticulously designed a first-grade renter experience. The transaction was also on the large side and represented a good opportunity to increase multi-housing exposure."
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The capital markets team also helped facilitate funding by providing potential lenders with local market metrics to show the long-term strength of the market. "Outside of thoroughly exploring the entire lending universe, JLL provided comparable statistics for properties in lease up throughout the west coast, as well as statistics that demonstrated the Bay Area's continued dominance as the mecca of the tech world. Once Lenders were able to tour the asset, the Project sold itself," says Witt.
This deal came to market during the depths of the COVID-19 pandemic and the borrower was able to secure funding. As the market improves, capital availability is only improving. "The successful execution demonstrates that even during the nadir of the San Francisco pandemic story, capital was available for San Francisco assets," says Witt. "The current lending market continues to improve and the availability of capital continues to increase."
City Gardens is a 200-unit apartment building with a mix of two-, four- and five-bedroom micro-units. The property also features fully furnished bedrooms and living areas, city views, 9-foot ceilings and a sustainable design with high-efficiency lighting and plumbing, laminated heat resistant glass and energy recovery ventilation.
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Kelsi Maree Borland
