Two new multi-family development projects are rising! One is just a few blocks from the USC campus and another just a short walk to downtown Pasadena. On both projects, the developers utilized PACE financing to increase their total leverage up to 75% LTC and make up for increasing construction costs. The developers partnered with K2 Clean Energy Capital for their technical background and depth of PACE experience to source the PACE funds and help develop their capital stacks.
Rendering of 1314-1338 W Jefferson BoulevardPrime Design
The Jefferson Flats student housing project is a 132-unit, six-story building located at 1320 West Jefferson Boulevard just a 10-minute walk to the USC campus. The project was developed by The Prime Company, a vertically integrated developer and owner with multiple projects across the country. The property has underground parking and amenities including an exercise room, common study and recreation areas, and a roof deck.
Last year’s delays and increasing costs drove the need for additional funding. The $6.0M of PACE funds helped cover the gap after the debt leverage was fixed.
Bryan Elsey, CEO of The Prime Company, said “K2 maximized our funding and brought us multiple PACE options with a wide range of rate and terms which gave us the confidence that we got the best overall solution. This enabled us to complete the capital stack and to reduce our total equity investment in the project. We plan on using PACE financing on all our new construction projects as it significantly improves our overall returns. With the financing closed, we have started construction and aim to be ready for incoming students by the fall of 2022.”
Aerial view of the Madison Grove ApartmentsPanoptic Partners
The Madison Grove Apartments at 417 N Madison Ave is a new construction three-story, 35-unit, multifamily apartment complex within a 15-minute walk of the Paseo shopping center and downtown Pasadena as well as just 1-1/2 miles to both Pasadena City College and CalTech.
Jason Wang, President of Panoptic Development, said “over the past year lumber and other material and construction costs have increased substantially. The PACE financing helped to cover the increasing costs, and the payments are delayed until after completion. This dramatically helps the project cash flow. We were extremely pleased with the support of K2 Clean Energy Capital who not only obtained the best PACE terms for us, but they were able to push the City of Pasadena to opt-in to the program specifically for our project.”
As developers are squeezed by lower construction loan amounts being offered by debt providers and increasing construction costs due to supply chain issues, the need to preserve capital and reduce financing costs is critical. PACE provides a non-recourse financing vehicle for commercial real estate developers to increase leverage, lower overall financing costs, and complete their capital stacks.
About K2 Clean Energy Capital:
K2 Clean Energy Capital, founded by Stephen Tsu and Jonathan Pickering in 2013, is a leading originator and developer of C-PACE retrofit and development projects primarily in the multi-family, industrial, and hospitality industry sectors. The locally-based company provides Energy Advisory and PACE Financing Services for commercial property owners and developers throughout California and the Western US. K2 is a CSLB licensed general & electrical contractor and CA Finance Broker. For more information please visit: https://k2cleancap.com/
About The Prime Company:
The Prime Company is a vertically integrated real estate development, construction and property management organization. The company focuses on the student housing and multi-family projects throughout the mid-west and California. The company has been developing properties for over 10 years and has over $200 million in assets and over 2,300 bedrooms owned and managed. The organization was founded with the dream of giving away 90% of profits annually and is working towards that goal with over 30% of profits currently donated to missional causes in the U.S., India, and Africa.
About Panoptic Development:
Panoptic Development designs progressive residential, multi-family, and mixed-use properties that stimulate positive changes in communities and lives. The company is a privately owned, diversified real estate investment firm that develops and invests in properties independently, in joint ventures with institutions, and in partnership with high-net-worth individuals. Panoptic specializes in finding unique spaces in prime areas of Los Angeles with a big picture focus on quality of life, transit, and walkability. It is also vertically integrated as an investor, developer, owner, and manager of the properties.
