Condo Buyers Fund Construction With Bonds in Beverly Hills Tower Deal
Cain, a London-based investment firm, is raising capital for its $10 billion One Beverly Hills project by selling bonds to the same buyers purchasing its condos. Condo purchasers have already provided around $350 million through what Cain calls Founder Bonds, which pay a 5 percent return and are typically worth 30 percent of the purchase price. The developer aims to raise more than $1.6 billion through the program. All buyers so far have agreed to participate, though the program is voluntary.
The bonds are subordinate to a $2.8 billion senior loan led by J.P. Morgan and a $1.5 billion mezzanine loan from VICI Properties, putting buyers at risk if the project fails to complete. California law limits developer deposits to 3 percent of purchase price and bars using those funds for construction, but those restrictions do not apply to the bonds. The 5 percent return now trails the 10-year Treasury yield, which recently exceeded 5.3 percent. David Reiss, a professor at Cornell Law School, said buyers are accepting a large amount of risk for a small return, though wealthy purchasers may be better positioned to absorb potential losses.
One Beverly Hills, scheduled for completion in 2029 on 17.5 acres, will include Aman-operated condos starting at $15 million, hotel suites, high-end retail, and botanical gardens. Recent sales have exceeded $7,000 per square foot, and one penthouse reserved in July would sell for $200 million. More than $1 billion in units are under contract or reserved. Cain says it has the funds to complete the project without the bonds, but the buyer financing would replace some of its equity commitment.
Los Angeles condo sales through August were the lowest on record since 2012, according to Redfin, and several recent luxury condo projects have ended in developer defaults. Michael Shvo defaulted on a $200 million loan at the Beverly Hills Mandarin Oriental in 2024 and sold remaining units in bulk the following year. Brokers say the ultraluxury market above $10 million attracts different buyers seeking lock-and-leave flexibility, and Beverly Hills has continued to perform even as other parts of the city have declined.
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