Lending Data: Lotus Capital arranges novel $70m Miami-area acquisition, development loan

The loan, part of Real Estate Capital USA's weekly lending data report, will allow sponsors to both acquire the real estate and then move ahead with ground-up construction.

New York-based advisory Lotus Capital Partners has arranged and structured a $70 million loan on behalf of sponsors Pearl Property Group and L3C Capital Partners to fund the acquisition and development of a high-end condo development in Bay Harbor Islands in Miami. MSD funded the loan. The loan is part of Real Estate Capital USA‘s weekly lending data report, published every Tuesday.

The loan will allow the sponsors to acquire the one-acre site, which faces the Bay Harbor waterway, and then build 46 high-end luxury units on the site, noted Faisal Ashraf, managing partner at Lotus. There is now a 30-unit condominium building on the site, with the sponsor planning to demolish the existing property and prepare work for the new structure.

The loan’s structure is novel in that it allows the sponsors to both acquire the real estate and then move ahead with ground-up construction, Ashraf said. Toward the end of 2024, MSD will fund the construction tranche of the loan.

“There is a lot of talk about this dual-tranche structure. However, it is rarely seen or done in the market,” Ashraf said. “We understood our client’s needs and were able to work with a creative lender who saw the world the same way we did.”

Typically, a sponsor will line up acquisition and pre-development financing first and, about 12 to 24 months later, go back into the market for construction financing.

“This often leads to uncertainty for the sponsor and results in significant friction costs,” Ashraf said. “In the case of the financing package we have secured, the acquisition loan will address the pre-development needs of the sponsor, including demolition, excavation, and marketing costs along with the acquisition of transfer development rights.”

The Bay Harbor, Bal Harbor and Surfside markets have seen strong in-migration over the past few years, a phenomenon which has been accelerated. The area is about 15 miles away from Miami, with additional proximity to Fort Lauderdale and Aventura. There is also nearby retail and dining options, including Bal Harbor Shops.

Pearl Property Group is an established sponsor in the area, and recently completed projects which include the development of SLS Residences in Hallandale Beach, a 250-unit, 27-story property for which Lotus arranged $100 million of financing.