October 13, 2026
Condo Project Borrows From Its Future Residents
By AramilFeraxa – Own work, CC BY 4.0
The Wall Street Journal quoted me in The Luxury Beverly Hills Condo Project Borrowing Money From Its Future Residents (behind a paywall). It opens,
The developer behind one of the country’s most expensive real-estate projects has an unusual request for its condo buyers: Lend us money.
Purchasers of the site’s roughly 150 condo units are also providing debt to help Cain, an investment firm based in London, fund its $10 billion project, known as One Beverly Hills.
The 17.5-acre site, set to be completed in 2029, will include high-end retail such as Dolce & Gabbana, upscale dining, 78 new hotel suites and acres of botanical gardens. The ultraluxury condos will be operated by Aman, one of the world’s leading high-end hotel operators.
The condo owners’ debt takes the form of a bond—the developers call them Founder Bonds—and buyers will receive a return of 5%, according to a person familiar with the matter.
No condo buyers are forced to participate in the bond program. Founder Bonds offer a financial return and the opportunity to assist in the construction of their future home, Cain has told condo buyers.
When the Founder Bond program was launched early last year, 10-year Treasury debt offered less than 5% returns. In recent weeks, however, the 10-year yield has exceeded that level, rising above 5.3% at one point this month. That means Founder Bond holders are now earning less than the yield on Treasurys, which are commonly considered the “risk-free” rate.
But some say this rarely seen financing tool sticks condo buyers with a risk.
The bonds are junior to other debt on the project, which includes a $2.8 billion senior loan led by J.P. Morgan and a $1.5 billion mezzanine loan from VICI Properties. Parts of both loans are conditional on Cain hitting certain sales milestones.
That means that if the condo towers were to fall short of completion—in a city where most luxury buyers are focused on single-family homes and estates—bondholders could be left not only without the penthouse they were expecting, but also without the extra money lent to the developers.
“Even though these are luxury buyers, I would guess they’re going to face more exposure if the project goes bust than they may realize,” said David Reiss, a professor at Cornell Law School, who researches real-estate finance. “They’re getting paid a small amount to take a large amount of risk…but because they’re luxury, they may be able to tolerate the risk better.”
