Mixed use has proven far more than a mixed blessing for Fremont Investment & Loan.
A unit of Santa Monica-based Fremont General Corp., the thrift has carved out a niche in mixed-use development. Loans to mixed-used projects last year accounted for 25 percent of its $5.6 billion in construction lending.
Recognizing there is little undeveloped space left in Los Angeles, the firm sees the development trend as an attractive opportunity that benefits both residents and cities while providing a solid return on investment.
"You have to integrate different opportunities into each project to utilize what little land is left," said Nancy Sulse, Fremont Investment & Loan's vice president and general manager.
Still, mixed-use projects are risky investments that require detailed knowledge of office, retail and residential components and their entitlements. When structuring a deal, Fremont looks at the current entitlements as well as the location of the project, since it's easier in some locales than others to alter entitlements.
"Entitlement issues that go into a mixed-use project make it a public policy issue. For every risk, we have structured a way to mitigate that risk," Sulse said.
The firm often takes on challenging development plans that have significant hurdles and approvals to overcome. However, it may create milestones that a developer must fulfill in order to receive the full amount of a loan.
Among its projects, Fremont has provided $63 million to IDS Real Estate Group for its 6.3-acre Metropolis project in downtown Los Angeles. The project generated significant interest from numerous lenders because of its size and location. "We chose Fremont because of their ability to recognize the value in the property and work with our business plan," said Patrick Spillane, IDS Real Estate Group senior vice president.
Fremont also invested in an old office campus in the city of Hawthorne. "We had an exit strategy and chose to lend on a project that hadn't been occupied for years," Sulse said.
* Best Lender
Fremont Investment & Loan
Tom Whitesell, senior vice president of commercial real estate
Nancy Sulse, vice president and regional manager
2005 Loans: $5.65 billion
Description: Commercial and residential real estate lender specializing in commercial loans on mid-market properties, as well as non-conforming residential loans.
Quote: "We like doing mixed-use because we have the ability to underwrite all aspects of the project. Most other lenders are compartmentalized. We see a retail component as a necessity," Sulse said.
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