Photo (Above): iFC’s Chris Tereo and Stamm Development Group’s Team breaking ground, on site, at one of the projects
HIGHLIGHTS:
CLIENT: Stamm Development Group
LOCATION: Delray Beach, Florida
DATE: 2021-2022
iFC Loan Product: Acquisition/Bridge/New Construction Loans
Property Types: Luxury and Super-Luxury Single Family/Townhome Development Projects
Total Loan Amount: $40 million
ARV/Unit: $1.8 – $4.3 million
Loan-to-Value: Up to 75%
Loan-to-Cost: 80 – 85%
Length of Loans: 12 – 24 months
Speed to Close: 2 – 4 weeks
Number of Projects Funded: 6
OVERVIEW
Mike Stamm, Founder, President and CEO of Stamm Development Group (SDG), a Philadelphia-based development firm that specializes in residential, multifamily, and new construction, was primed to get into the highly competitive Delray Beach, Florida real estate market.
He planned to build six luxury and super-luxury development projects. He needed bridge acquisition and ground-up construction loans for projects that would be completed in several phases, over the course of two years.
Although Stamm Development has major development experience in Philadelphia, and had a full network, team, and development plans ready to go in Delray Beach, Mike was growing frustrated with the lending options available. He explains, “Banks were really hesitant from a regulatory perspective to follow us into a new market where we had no track record.”
In early March 2021, Mike called Chris Tereo, Co-Founder and VP of sales at iFC, and the two headed to Florida where Mike showed Chris his vision for Delray Beach developments.
Within thirty days, SDG had purchased five development deals with iFC funding. Five of the settlements happened over a span of eight days. Says Chris, “All said and done, our total loan amounts for the first five deals will total $38 million with all construction funded.”
A few months later, iFC funded a sixth SDG Delray Beach project for approximately $2 million, bringing the total loans committed to SDG Florida projects to $40 million.
Says Stamm, “iFC’s ability to do that type of funding alongside their capital partners is really unmatched—especially in the south Florida market. As people enter new markets, the competition for projects requires lenders to have speed, commitment, and capital. iFC checks all those boxes!”
Project construction begins in Fall of 2021 and goes through 2022.
Photo (Above): iFC’s Chris Tereo and Stamm Development Group’s Mike Stamm
THE PROPERTIES
10 PALMS: 918 Palm Trail: Delray Beach, Florida
Overview: Purchase of land and construction of 10 luxury townhomes to be completed in two phases. The first phase consisted of funding 80% of the total project cost with 100% of soft and construction funded in escrow, and 50% of the acquisition price.
Once the first five home foundations are up and the buildings are 50 to 75% complete, iFC will “release” the remaining land from the loan to originate a new construction loan for the remaining five homes.
iFC Loan Product: Acquisition/Construction Loan
Property Type: Luxury Townhomes
Date: Groundbreaking Ceremony: September 2021
Loan Amount: $15,453,766 (Phase 1)
ARV: $2 – $2.4 million per unit
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SIRÉNE VILLAS: 1236 George Bush Blvd., Delray Beach, Florida
Overview: New construction of six super-luxury townhomes to be completed in two phases. iFC funded 54% of the $5.8 million dollar purchase and 100% of the soft costs of $220,000 for a total loan of $3.386 million dollars.
Once the project has full zoning and building permits, we are going to refinance into a new construction loan for $11.79 million to build the six townhomes.
iFC Loan Product: Acquisition/Construction Loan
Property Type: Super-Luxury Townhomes
Date: Construction begins Fall 2021
Loan Amount: $3,386,000
ARV: $3.7 – $4.3 million per unit
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2LAGO: 724 Lake Ave., North Delray Beach, Florida
Overview: New construction of two townhomes to be completed in one phase. We financed 85% loan-to-cost of this deal with 100% of hard and soft costs, and 40% of acquisition (the reason the day one leverage is low is because of the renovation ratio: new construction projects have very high renovation ratios, which is the value of the purchase price versus the total construction budget).
The purchase price was $750,000 and the construction budget was $1,959,950.
iFC Loan Product: Acquisition/Construction Loan
Property Type: Luxury Townhomes
Date: Construction beginning Fall 2021
Loan Amount: $2,197,149
ARV: $1.8 million per unit
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508 NE 7th Ave., Delray Beach, Florida
Overview: New construction of three luxury townhomes to be completed in two phases. We funded 50% of the acquisition and 100% of soft costs of $1.2 million. Once the building and zoning permits are approved, we will refinance the deal into a new construction loan for $3.5 million.
iFC Loan Product: Acquisition/Construction Loan
Property Type: Luxury Townhomes
Date: Construction begins Fall 2021
Loan Amount: $4,559,000
ARV: $2.3 million per unit
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SOLEIL VILLAS: 1201 George Bush Blvd., Delray Beach, Florida
Overview: We funded this property with a bridge acquisition loan of an existing office building. The project will be completed in two phases. The first phase consists of originating an acquisition loan for 65% of the purchase price. Once the project receives zoning permits, the borrower will demolish the office building (planned for January 2022). We will then originate a new loan that is to be determined, based on the number of units that get approved to build.
iFC Loan Product: Bridge Acquisition to New Construction Loan
Property Type: Luxury Townhomes
Date: Construction begins Spring 2022
Loan Amount: $1,657,500
ARV: To Be Determined
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PALMETTO HOUSE: 924 NE 9th Ave., Delray Beach, Florida
Overview: This is a new construction project of a 4-bedroom, 4.5-bath single family home with a 4-car garage, pool, and spa. We did 85% loan-to-cost with 100% construction financing.
iFC Loan Product: New Construction Loan
Property Type: Single Family Home
Date: July 2021
Loan Amount: $1,941,389
ARV: $3,135,000
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CHALLENGE
Michael Stamm, who founded Stamm Development Group in 2015, is one of Philadelphia’s more active ground-up, new construction, development firms. They specialize in boutique apartment buildings, and are doing approximately 250 units a year, with 80% of their business being for rent, and 20% for sale.
Mike explains, “Over the last couple of years, the low barriers of entry into the ‘for sale’ market of Philadelphia have become very competitive. This was accelerated by certain pandemic-related events.”
Seeing the excitement in the South Florida market, Mike had been looking to expand his company into that area for over a year and was sourcing development deals there.
However, he says, “The one frustration that we ran into repeatedly was that we had an equity team that was willing to follow us, and the deal strength was there. We had engineers and general contractors, but we did not have anyone willing to follow us from a debt perspective.
“We spoke with one of the top five biggest banks in the U.S. but due to the regulation in the new market, they are so driven by phasing and presales. When you look at loan-to-cost, their interest is prime-plus-something. There is 70% loan-to-cost, and they want you to presale two or three of the five-pack before you come out of the ground, and you are still assembling your engineers!”
Explains Stamm, “I knew we had to get creative from a capital stack perspective. So, I called Chris at iFC.”
SOLUTION
Photo (Above): All parties associated with the development of “10 Palms.”
Says Chris Tereo, iFC Co-Founder and VP of Sales, “Everybody sees what Mike has accomplished here in Philadelphia: single-family, ground-up, condo conversions, multifamily, residential, commercial, and mixed-use. We have been trying to figure out a way to work together, so when this Florida opportunity came about for us to go down there and do something big—change the Delray Beach real estate game with Mike Stamm and his team—we were all over it. At that time, we had also been focusing on building our network and doing more business in Florida, so we were super excited to go down there and branch into a new market with Mike.”
Chris was impressed with the all-around potential in Delray Beach. “I walked Atlantic Avenue. There was live music, great restaurants, and a lot of new construction. For a lender/investor, I was a kid in a candy shop. Plus, Mike had built a massive network and infrastructure down there, and we were extremely impressed,” he says.
Mike and Chris worked quickly to bring the funding together for five different luxury townhome projects.
“Chris was the one person who was willing to take a chance on us with an aggressive timeline and an aggressive capital stack,” says Mike. “When you work with a firm like i Fund Cities and Chris, they can get so flexible on a deal-by-deal structure. They were able to phase it with us and give us some imputed equity based on us buying something really well (I.e., we bought something for just over $4 million that we thought was worth over $5.5 million, which took our loan-to-cost up to an attractive mark, where iFC could be a senior debt lender, and have the mezzanine equity piece).
“That is such a crucial takeaway because iFC has such an interesting capital stack that if you really understand it, it can be as competitive as any platform in the entire market. We had so much success underwriting our first transaction together that any other banker would have thought I was crazy to say, ‘Hey, Chris, I have more of them!’ But we got each and every one of them done. We had no doubt that iFC was going to be there for us. The timelines were really tight. We cannot thank iFC enough.
“We purchased five development deals in a new market in a 30-day span with five settlements happening over eight days.” (A sixth new project was added later.)
Mike saw immense value in iFC’s funding approach. He explains, “In a typical transaction, where bank capital is 70 to 75% loan-to-cost and the rate might be less, what is the cost of your mezzanine equity and your real equity? There is a significant cost to the capital there.
So many borrowers get caught up by the 4% low rates, but they do not look at it correctly from an overall deal perspective, because if you can get a loan from i Fund Cities in the mid-eighties, your cost of capital is unmatched.
As a sponsor, you can obtain and retain so much more of a transaction at a lower cost of capital, as iFC really acts as both a senior position and a mezzanine. If you look at the blended rate, there is no other product out there, regardless of what city you are in, that anyone is offering right now.”
RESULT
“My organization had such an amazing experience with Chris and the entire i Fund Cities team,” says Mike. “Aside from just the capital stack, the willingness, and the commitment, iFC’s biggest asset was speed.
“We entered one of the hottest markets in the entire U.S. right now. When things are competitive, and you are putting offers together, speed is everything. The assurance of closing in 30 days or less makes a transaction happen or not. If I were to go to a bank in a new market, I am looking at 90 to 120 days. Chris settled five of them in four weeks.
“It shows the scale, trust, and iFC’s ability to close sizable transactions. To be able to execute this deal during a pandemic, in a new market, with a new client … nobody else was going to do that.”
Says Chris, “It was already an attractive time for us to be going down there and build our Florida market, given the pandemic. Couple that timing with a core developer, and great borrower, who has products they are buying right, and building at the right cost, and it was a good opportunity for us.
“It makes sense for us to be down there, where we can continue to find deals like this one with Mike, as well as with other major developers.”
Things went so well in South Florida that, immediately after the settlements there, Mike called Chris with another deal—a 77-unit ground-up project back in Philadelphia.
Says Mike, “It is exciting to have shared this success in South Florida and have brought it back up into Philadelphia. We are excited to continue to find ways to work together. This is the start of something special. We have found so many efficiencies between my team and yours. We could not be happier. Thank you because none of that expansion was possible without you and your team.
“I really encourage other similar-sized firms to call iFC because their platforms are customizable. They are unique, they get it, and it works really well.”
Learn more about Stamm Development Group’s Florida portfolio here.
ABOUT US
i Fund Cities is an “alternative” lending platform offering custom real estate funding options for every level of investor, across a full range of lending products.
As investors ourselves, we are just like you: hustle and grit, not suit and tie. We give you speed, transparency, knowledge, and a personalized investing partnership that you are just not going to find anywhere else.
If you would like to learn more about what we offer, you can Schedule a Call with one of our Loan Officers or Get a Quote on your project.