CapitalSource Provides $82M Construction Loan for San Fran Student Housing

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Student housing owner and operator Panoramic Interests has scored an $82.3 million construction loan from CapitalSource for City Gardens, an eight-story, 200-unit development in San Francisco, Calif., Commercial Observer has learned.

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Terra Capital Partners also made a $24 million preferred equity investment in the project.

“San Francisco has an estimated 80,000 students but an inventory of only 9,000 beds, creating a significant shortfall. Panoramic Interests is trying to close that gap and, in the process, provide students with better housing options at a lower cost,” Thomas Whitesell, a managing director in CapitalSource’s real estate group, said in prepared remarks. “As a pioneering developer, Panoramic Interests found a way to create more value than most through efficient design, prudent acquisition, and the ability to navigate esoteric laws that ultimately benefit their tenants. This is our second deal partnering with Panoramic, and we look forward to working with them on future deals and development.”

The project, located at 333 12th Street will include a courtyard and garden plus a bike storage room with 176 bike parking spaces. The development, due to be complete in early 2020, will serve students of San Francisco State University and San Francisco Art Institute.

Panoramic Interests, owned by micro developer Patrick Kennedy, has been building housing, live-work space and commercial property in the Bay Area since 1990.

“We’re hyper-concentrated on the Bay Area,” J.P. Walsh, Panoramic Interests’ director of finance, told CO. “It’s something we know well and understand. We have almost 1,600 units in the pipeline.”

Panoramic has transacted with both CapitalSource and Terra Capital Partners in the past and had a good working relationship with both, Walsh said: “They’re flexible, and great financial partners for us. Thankfully, our projects have been ahead of schedule, on budget, and the financials have improved over time. With rising construction costs across the Bay Area, that can only be a good thing.”

Walsh explained that the developer typically master leases its properties to a school for five years, for example its 161-unit property at 1321 Mission Street is master leased to the California College of the Arts and the San Francisco Conservatory of Music. The school will typically renew its lease but if not Panoramic Interests will take the micro units to the market and target workforce housing residents such as teachers and nurses. Simplicity is key. “We’re not providing pet spas or gyms in our buildings, price is our number one amenity,” Walsh said. “We usually have a great lobby and an excellent roof deck but no extreme luxuries in our buildings and zero parking. We focus on transit-oriented developments.”

The developer is meeting a critical affordable housing need in San Francisco, where there have been seven jobs created for every one household created in the past two years, Walsh said.

333 interior downtown sf view CapitalSource Provides $82M Construction Loan for San Fran Student Housing
333 12th Street’s Interior with a downtown view of San Francisco. Rendering: CapitalSource