Money Backs Two Newly Constructed Los Angeles Multifamily Properties
The Charlie Santa Monica includes 99 apartments spread across three boutique-style buildings. (CoStar)
By Mark Heschmeyer
October 6, 2023 | 12:14 P.M.
PGIM Real Estate, the global asset management business of insurer Prudential Financial, has provided a combined $143.5 million of floating-rate bridge loans to LaTerra Development for two newly constructed multifamily properties in greater Los Angeles.
The loan was made through PGIM’s core-plus debt strategy that finances newer, high-quality properties in the strongest markets.
Life insurers remain relatively free of risk from current disruptions in the commercial real estate market because of such strategies, according to a report from bond-rating firm Fitch Ratings. However, even given the strength of their diversified commercial mortgage portfolios, some weakness is starting to emerge for insurers in the multifamily sector, Fitch warned.
A small percentage of properties have negative cash flow amid higher rates and outsize supply pressure valuations, Fitch noted. Insurance costs are rising dramatically in some areas due to increased frequency and severity of losses as a result of more volatile, weather-induced flooding and fires due to climate-driven risks.
The properties on which PGIM is lending are in the Los Feliz and Santa Monica markets.
“The Los Angeles multifamily market remains strong, and the supply/demand imbalances in the Los Feliz and Santa Monica submarkets in particular are allowing us to move quickly through lease-up of both the residential and retail spaces,” Chris Tourtellotte, managing director at LaTerra, said in a statement.
One property is the Louise Los Feliz, which features 246 units with 20,487 square feet of ground-floor retail space. The other is The Charlie Santa Monica, which includes 99 units spread across three boutique-style buildings, in addition to 20,858 square feet of ground-floor retail space.
LaTerra will use the bridge financing to take out the existing construction loans as it leases up and stabilizes the properties.