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October 11, 2016

DTSD Could See More Large Financings

ALM GlobeSt

Carrie Rossenfeld

SAN DIEGO-A $135-million financing for a 45-story apartment tower Downtown shows that lenders are seeing renters as more-stable and permanent residents than condo owners who often use their assets as second homes, Kidder Mathews' SVP, debt and equity finance, Jamie Dick tells As we recently reported, Dick and loan analyst Jay Dick arranged financing in the amount of $135 million for the borrower and developer-whom has learned is owner Pinnacle International-of Pinnacle on the Park, Phase I, a 484-unit, 45-story apartment tower in Downtown's East Village neighborhood. The purpose of the loan, we have learned, was to retire the original construction loan that was used to build the tower.

We spoke exclusively with about lenders' sentiment toward the East Village apartment market, whether we will be seeing more financings of this size in this market and other financing trends he is noticing in this submarket. What do lenders like about the East Village apartment market?

Dick: Lenders are more and more realizing that the San Diego Downtown residential market is here to stay and not just a passing fancy. Interestingly enough, it appears to me that the "for-rent" segment of the market is what is driving this and not the "for-sale" projects. I believe this is so due to lenders seeing renters as being more-stable and permanent residents than condo owners who, many times, have units that are second residences and are not full time occupants there. This, combined with the extremely tight apartment market throughout San Diego County, results in Downtown in general and the East Village in particular being viewed as stable, growing and, most importantly, permanent residential communities. Will we be seeing more huge financings like this in the Downtown San Diego market?

Dick: I believe so. Though we will continue to see more "for-sale" projects in the future, I believe the "for-rent" market will continue to grow. Large (permanent-loan) financings like Pinnacle on the Park, of course, are specific to the "for-rent" segment of the residential market. What other financing trends are you noticing in the Downtown San Diego market?

Dick: We will also see more and more large, mixed-use projects being financed and developed in Downtown San Diego. These projects will combine residential (both "for-rent" and "for-sale" in the same project), retail, office and hospitality, along with privately developed public spaces (like Fault Line Park at Pinnacle). Another great example of this is Cisterra Development's proposed Downtown project, which will include a Ritz Carlton Hotel, Whole Foods food store, office and residential use all in one city block area. What else should our readers know about this transaction?

Dick: Ultimately, any development project is judged (especially by lenders) by its acceptance by the public. Though ground breaking and unique in size, scope, location and height, Pinnacle on the Park has been completely embraced by the renting public, which can be seen by how quickly the project has rented up.

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