We have a 1st mortgage acquisition loan request from a borrower who has tied up a 1.4 acres development parcel for $18MM (million) in the City of Langley, BC. Langley is the 2nd fastest-growing City in Vancouver Lower Mainland and is still considering one of the more affordable places to purchase a home.

The subject property is in an area designated under the municipality's Official Community Plan for a future low-rise condo development. The borrower has completed their due diligence and intends to construct a 150 residential units condo building at an allowable 2.1-floor space area (FSR).

The subject project is presently improved with a rental townhouse, fully tenanted, with an annual net operating income of approximately $250K. This offers some holding income and cash flow for the borrower while going through the entitlement/permitting process. The borrower has established a brand-new B.C. incorporated entity for this acquisition, and both the shareholders are Canadian citizens.

We felt comfortable given the developers strong knowledge of the construction industry overall and they have completed enhanced due diligence on the project to ensure that the City will allow for the proposed development. The project is financially sound, with an expected return on the cost of 17%, supported by third-party reports completed by external consultants (appraisal, environmental, geotechnically).

They have taken a proactive approach to engage some of the most capable construction partners to execute the project. The site, the underlying collateral, is located in a prime area where there are a lot of transactions happening in proximity. Also, the price-point of the parcel and the end product would be very palatable for the general investors and end users..

The appraisal report was completed by one of the top appraisers in town, and it shows that there is already a surplus where the appraised value is $800K over the purchase price. The cash equity that the borrower injects into the purchase should be sufficient for them to meet the equity requirement (20%) to obtain construction financing from a conventional bank lender for our future exit.