Holland Partner Group Nabs $168M Loan for Santa Clara Site

Holland Partner Group has received a $168 million loan from its joint venture partner on the pair’s planned apartment development near Caltrain in Santa Clara. The project is across from an office campus that will secure the loan to build more than 400 units.

The North American division of Sekisui House, one of Japan’s largest homebuilders, lent Washington-based Holland up $168 million for what’s colloquially known as Gateway Crossings Lot 2, a 407-unit apartment project spanning 4 acres at the southeast corner of Corcoran Drive and Chastain Place, according to public records.

The project is part of the larger first phase of Gateway Crossings, consisting of two buildings with 725 apartments ranging from studio to three-bedroom units, nearly 17,000 square feet of space for shops and restaurants on both structures’ ground floors, and a 2-acre park. It’s half a mile north of a Caltrain station and across the street from Coleman Highline, an office complex with about 1.8 million square feet of completed and planned space mostly leased to Roku and TikTok parent ByteDance.

Sekisui’s loan is backed by Holland’s leasehold interest on the Lot 2 site; the latter is leasing the parcel from Hunter Properties, Gateway Crossings’ and Coleman Highline’s master developer, through the end of 2120, public records show.

A copy of the loan filed with Santa Clara County’s Clerk-Recorder’s Office on Nov. 23 didn’t disclose financial terms. Neither Holland nor Sekisui responded to requests for comment. The document recorded with the county describes the companies’ deal, in the form of a deed of trust, as an acquisition, development and construction loan and security agreement. The latter allows the lender — in this case, Sekisui — to collect collateral — in this case, Holland’s leasehold interest in Lot 2 — that the latter is putting up for the loan.

The loan comes eight months after North America Sekisui House lent Holland $128 million to acquire the leasehold interest in the site of the other planned apartment building in Gateway Crossings’ first phase and to redevelop the vacant parcel into more than 300 apartments, according to public records. Construction on phase one began this spring, one of the project’s subcontractors wrote in a LinkedIn post at the time.

Neither Holland nor Sekisui has publicly disclosed a construction timetable, but given that vertical construction on Lot 2 had yet to begin as of October, it’s safe to assume that the project’s apartments won’t be completed for at least another year and likely further out.

Sekisui’s recent injection of capital into phase one comes amid a difficult lending environment for multifamily developers due to the impact of inflation and the highest interest rates since 2008. Higher interest rates constrain maximum loan proceeds, leading to scenarios in which borrowers need to put in more equity to make up for the shortfall, Tom Wight, a commercial mortgage banker at NorthMarq Capital, wrote in a November article. While that may not matter much to deep-pocketed developers, it does for smaller players in the multifamily sector, especially since San Francisco and other parts of the Bay Area are at or near the top of the list of the most expensive places to build in the world.

Some large projects, such as Related California’s two-building, 700-unit apartment development in Santa Clara, have recently been able to secure construction financing despite market headwinds. In Related’s case, it received $690 million from Otera Capital, PNC Bank and Welltower for its project roughly five miles north of Gateway Crossings. Others, such as Holland and Sekisui’s, underscore the benefits of forming a joint venture with a capital partner, particularly one that, in the latter’s case, has a market cap of $12 billion, according to Yahoo Finance data.