As a catalyst for the transformation of Los Angeles’ Arts District, One Santa Fe was a groundbreaking mixed-use project. As the subject of an investment sale, the property at 300 S. Santa Fe Ave. in L.A. was backed by an incredibly complex” capital structure, in the words of Moran & Co., which marketed One Santa Fe for sale.
The project was conceived amid the 2008 downturn, by a team led by Bill McGregor of McGregor Brown and Chuck Cowley of Cowley Real Estate Partners. Although the Arts District was less than a mile from L.A.’s civic and financial district, at the time it was largely an assortment of warehouses virtually unknown to the institutional investment community. In order to capitalize this transformative project during the recession, the development team had to assemble an “all of the above” financing strategy. The resulting capital stack included Low Income Housing Tax Credits, New Market Tax Credits, ground lease financing from L.A.’s Metropolitan Transportation Authority and a Community Development Block Grant. What the project still lacked was a development equity partner, which took the form of Canyon Partners Real Estate, which made the investment through its Canyon-Johnson Urban Fund III while also serving as a development partner. The 500,000-sf project, including 438 apartment units, broke ground in early 2012 and was completed in 2015.
Beyond lining up the financing for construction, there was also the matter of drawing would-be investors to a project with an exceptionally complex capital structure, and which was less than 50% leased in a neighborhood that hadn’t yet reinvented itself. The Moran & Co. team of Mary Ann King and Brett Betzler employed a road show approach, taking investors through the Arts District and unveiling the story—past, present and potential future—of each building in the district. Ultimately, the ground lease for One Santa Fe traded to Boston-based multifamily investor the Berkshire Group for $178 million in May 2016.
Also involved in the deal were Maria Stamolis and Frank Liu, Canyon Partners Real Estate; Eric Schrumpf and Mike Green, Berkshire Group; seller attorneys Bruce Fraser and Paul Turbow, Sidley Austin; buyer attorney Richard Toelke, Morgan Lewis; tax credit partner Goldman Sachs’s Michael Lohr; tax credit advisors Gary Downs and Tuan Pham, Down Pham Kuei and Nixon Peabody’s Faith Bruins; and transaction attorney Aviva Yakren, Jones Day.
As Featured in Real Estate Forum’s Best of 2016 Deals, Dealmakers, Places, Placemakers: http://www.reforum-digital.com/reforum/mar_apr_2017?pg=46#pg46