To get deals closed, buyers are finding they need to make lenders comfortable.
“In this environment, lenders are just looking for better risk compartmentalization on their loan facilities,” said Max Friedman, partner at Los Angeles–based private real estate investment firm Banyan Residential. “Borrowers that have the ability to offer flexible structures are better positioned to get deals across the finish line.”
In December, Banyan Residential employed that flexibility when it purchased a partially completed build-to-rent townhome community in Las Vegas for $61 million — the firm’s fourth purchase of 2022.
“We've used different structures to get the lender more comfortable with the risk profile, especially in this volatile market,” Friedman said. “We'll fund with more equity upfront until the product has reached a certain level of occupancy, at which time we will effectively reconcile with the lender.”
Banyan Brighton’s final units are expected to be delivered in the third quarter of 2023. Once completed, the development will include 133 two- and three-bedroom townhomes. The units, ranging from 1,396 to 1,479 square feet, will include an attached two-car garage, upscale finishes and private outdoor living space.
Friedman says the property's interior unit finishes, like quartz countertops, slab cabinets and stainless steel appliances, appealed to Banyan Residential.
“Folks who may have been investigating homeownership and gotten priced out due to rate hikes or just price appreciation in the last year or so can still find a high level of quality in the product that we're renting,” Friedman said.
A strong market
The property, which sits between the Las Vegas Strip and the Mt. Charleston neighborhood, is Banyan Residential’s first purchase in Las Vegas. The company likes the market for its business-friendly environment, weather and population growth.
“It’s a high-growth market that we like from a demographic standpoint,” Friedman said. “It has good job growth and good inflow migration from out of state.”
Banyan Brighton is located within the 1,000-acre Skye Canyon master-planned community. Residents will have access to amenities like a 10,000-square-foot indoor fitness facility, 5-acre sports field, full-service coffee shop, outdoor lap pool and five distinct parks, including picnic areas, tennis courts and dog parks.
“From an amenity standpoint, there's a lot to offer residents that they can take advantage of,” Friedman said.
By completing the Las Vegas transaction, Banyan Residential shows that financing is still available for the right deal with the right structure.
“What we're seeing in the market is that financing projects is increasingly difficult but not impossible for joint venture partnerships that have the right story in terms of the product that they're marketing, the execution strategy they're employing and good underwriting fundamentals,” Friedman said.
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