Priority Capital Advisory, a Los Angeles-based premier boutique debt and equity capital advisor for middle market and institutional developers, owners, and investors, has secured $18 million in senior debt financing for the construction of 17188 Chatsworth, a 69-unit affordable multifamily community in Granada Hills, California.
The project is participating in Los Angeles Mayor Bass’s ED-1 initiative, which streamlines the approval process for affordable housing projects. The sponsorship is a joint venture between local developers KH Equities and BMI Developments. Priority Capital Advisory’s Founder and President Zachary Streit arranged the financing on the sponsorship’s behalf.
“We are extremely excited to add much needed affordable housing to the Los Angeles landscape,” said Daniel Mense, a principal at KH Equities. “We knew the project was special, and we were not sure how it would be received by the debt capital markets given that ED1 is a relatively new program. We are very thankful to Zack and his team for their help and giving us the drive to move forward, as they put us in front of all the right lenders and generated real excitement around both the importance and the potential of this project.”
The development created significant interest in the debt capital markets. Lenders were drawn to the project’s affordability, significant tax abatement and the streamlined approvals afforded by the ED1 initiative. To qualify for the ED1 program, the project has an affordability covenant restricting 80% of the units to be offered at or below 80% of the Area Median Income (AMI), with the remaining 20% restricted to 120% of AMI.
After marketing the project to 100 lenders and considering three competitive term sheets, all with LTC’s in excess of 80%, Priority Capital secured and closed final financing with an exceptionally high loan to cost of 91%, the highest on Priority Capital’s records.
“While a 91% LTC is noteworthy all on its own – and the highest I’ve ever experienced in my nearly two-decade commercial real estate finance career – it was the aggressive nature of the lender participation that really set this deal apart,” noted Streit. “In addition to the affordability and ED1 benefits, lenders were attracted to the deal’s strong projected cash flow, and a robust return on cost – ultimately delivering a deal that made sense for all.”
Located in the San Fernando Valley, 17188 Chatsworth will benefit from the area’s diverse employment base anchored by the entertainment, aerospace, healthcare, and education industries. Most notably, major entertainment companies, including Disney, Warner Bros., Universal Studios, and DreamWorks Animation are all headquartered within 20 minutes of the property. Additionally, the property is proximate to multiple major hospitals, including the Providence Holy Cross Medical Center (8 minutes), Northridge Medical Center (10 minutes), and the Valley Presbyterian Center (12 minutes).
Based in Century City in Los Angeles, PCA specializes in arranging highly structured and innovative finance solutions for all commercial property sectors. Led by Streit, the firm is focused on financing transactions with a total capitalization ranging between $25 million and $200 million. Deals incorporate structures across the capital stack for pre-development, development, value-add and stabilized projects across all asset classes. PCA’s current pipeline exceeds $500 million.
