We’ve invested in the acquisition of a roughly 3,500 square foot industrial building in East Hollywood, Los Angeles. This project emphasizes our strategic shift toward debt and debt-like investments that provide an attractive margin of safety while still earning a strong return, in this case roughly 9% annually.
Business plan
The borrower plans to secure the necessary permits to renovate the existing warehouse into a creative office space. Upon securing the necessary permits, they plan to secure financing for the renovation and pay back our investment.
This type of investment is referred to as a bridge loan, since it provides a short-term financing solution until the borrower is able to move forward with renovations on the property. From our perspective, the primary advantage of making a bridge loan is the ability to earn an attractive risk-adjusted return without committing our capital for a long period of time.
Why we invested
- Transit-oriented location: The property is just half a mile from the Vermont / Santa Monica Station on the Metro Red Line, offering an accessible office location for companies looking to plant roots in an established urban neighborhood.
- Local repeat sponsor: The sponsor, Barth Partners, is an LA-based firm that focuses on value-add, opportunistic investments. Additionally, the principal of the sponsor has extensive experience in creative office redevelopment.
- Strong office demand: Office vacancy rates in the East Hollywood submarket at 5.7% are 43% lower than the broader LA region, according to Costar. Due to the property’s central, transit-oriented location, it is well-positioned to succeed as a creative office space.
