LWK, Cypress Equity Nab $100 Million Credit Facility

LWK Partners and Cypress Equity Investments recently cemented a $100 million credit facility from Ascent Developer Solutions to execute on their joint venture of increasing the density of existing multifamily properties in Los Angeles.

Inspired by SB 1211, which raised the number of detached accessory dwelling units that could be built on multifamily lots, LWK and Cypress first launched their partnership in January. And this new financing serves as a catalyst to continue and accelerate their work.

As co-general partners, Cypress brings the development expertise while LWK concentrates on the acquisition side of things, said Austin Nissly, co-founder and partner at LWK, based in Santa Monica.

"We went out to market together as a combined sponsor to raise institutional equity capital," he said. "And as part of that process, we needed a debt facility for these properties we're buying that have a large repositioning element to them and also have density addition potential."

Cypress previously had a relationship with Ascent and brought them on to "put together a rinse and repeat facility," Nissly said. Essentially, the structure of the deal allows LWK and Cypress to shift between acquisition and construction loans as they take up more projects.

"By streamlining capital access and execution, we're able to accelerate the delivery of high-quality, attainable housing in supply-constrained markets like Los Angeles, a critical need for working families and local communities" Michael Sorochinsky, founder and chief executive of Cypress, said in a statement.

Deal parameters

Targeting transactions ranging between $3 million and $10 million, the team aims to "scale LWK's existing portfolio from 200 units to a target of 5,000 multifamily units over the next five years," according to a release.

This will be from a combination of new acquisitions and working with existing product under LWK ownership with the goal of creating workforce housing. Part of this facility includes the $30 million recapitalization of seven of LWK's properties for the addition of 50 ADUs.

Estimating that 5,000 units is about $1 billion under management, Nissly views this goal as "a good size relative to the market to have institutional scale" where they can eventually attract institutional buyers.

As for neighborhoods of interest, Nissly said LWK's "DNA is West Adams and Mid-City," though they're also interested in Santa Monica, the San Fernando Valley, Leimert Park and Hollywood.

LWK and Cypress recently purchased a 20-unit multifamily property in Hollywood for $4 million with plans to add eight ADUs with a cost per unit for one-bedrooms at less than $150,000. Monthly rents will be under $2,000, decently lower than the average one-bedroom in Los Angeles which goes for $2,559, according to RentCafe. These rents are naturally affordable - not subsidized.

Another project is taking three, eight-unit buildings on three different parcels and adding four ADUs to each parcel, thus increasing the density by 50%.

Robert Wasmund, founder and chief executive of Ascent, said he looks forward to working with Cypress and LWK "as they develop new strategic approaches to address the national housing shortage."