Canyon Partners Real Estate, a division of global asset manager Canyon Partners, invests in an array of property types including mixed-use at a variety of stages ranging from existing assets to development. Between May and August, Canyon closed more than $130 million in senior bridge loans for multifamily, senior housing and mixed-use assets in Southern California. Spencer Schlee, who is based in Los Angeles, leads Canyon’s west region team which originates, structures, underwrites and executes debt and equity financing.
With the various types of projects Canyon Partners Real Estate invests in, what stands out about mixed-use projects, particularly in Southern California?
Mixed-use projects, when thoughtfully designed, create a synergistic environment that enhances the residential and commercial experiences. They bring together residents, employees and patrons in a way that amplifies the value of each component beyond what they could achieve independently. In Southern California, the focus is on developing in neighborhoods that are safe, walkable and offer a curated mix of desirable retail options, ideally with proximity to transit.
To what extent does financing strategy differ compared to other asset types?
Financing for mixed-use projects requires a comprehensive approach that considers both the project as a whole and its individual components. The ideal structure provides flexibility, allowing for the possibility to exit or refinance the individual components. This flexibility is crucial for optimizing the owner’s financial strategy and adapting to market changes.
What are the challenges associated with mixed-use projects and what are some solutions to mitigate those?
One of the primary challenges is ensuring that the commercial component is as well-conceived as the residential aspect. It must be designed to meet the space needs of desirable commercial tenants while also addressing the integration of parking, ingress and egress between the various uses.
How does investment attitude toward mixed-use projects vary among the different markets CP operates in?
Market selection is dependent on establishing conviction that each use would garner sufficient demand to lease-up on a stand-alone basis but is enhanced by being incorporated into a broader mixed-use development.
When evaluating whether to finance or refinance a mixed-use development in the L.A. market, what are your top considerations?
Key considerations include the desirability of the location and the ability of each use to maintain full stabilized occupancy. The safety and walkability of the neighborhood are crucial, as is insulation from competitive new supply. Additionally, the experience and track record of the borrower play a significant role, along with the financial basis of the transaction. These factors collectively determine the project’s potential for success and long-term viability.
Where do you see the future of this sector and what role do you see mixed-use projects continuing to play in the region’s housing landscape?
Given the severe housing shortages in Los Angeles and broader Southern California market, there will continue to be strong demand for mixed-use projects, particularly those which bring commercial uses which complement the living experience for residents. Projects which are designed to adapt to the shifting demands of residents, including spaces for flexible working, ample parking, access to unique food and beverage offerings and high-end amenities will stand to do best.
