The $29-million co-investment included nearly $6 million from Overland Realty Capital and $23 million in financing from CW Capital, according to Holliday Fenoglio Fowler. HFF represented the Bethany Group in arranging the acquisition financing and joint venture equity for the project.

Orange County-based Steve Gunther from HFF tells Globest.com that the finance structure for this deal was "somewhat atypical" of what he is accustomed to seeing. The acquisition and bridge financing carry a term of two years, with an adjustable rate, and are leveraged at 80% of the total cost, including remodeling costs.

Gunther says the boom in San Diego's condo conversion market has also made some players apprehensive about participating in certain deals. "Lenders are cooling to new projects except in strong barrier to entry markets and are picking their sponsors carefully," Gunther tells Globest.com.

Sunset Village is located at 3634 College Blvd. on the Carlsbad border of Oceanside. The property is 98% occupied as apartments and has been fully entitled as a condominium project since its construction in 1987. After the conversion, the property will still consist of 114 units, but they will be remodeled with granite countertops and stainless steel appliance kitchens.

The condominiums will bring affordable housing to San Diego County, where single-family homes are starting in the $600,000 range but the Bethany Summit units will sell for $285,000 to $350,000. Despite the apprehension of some lenders, the apartment-condo conversion market is still strong. According to Gunther, the threat of rising interest rates will have little no effect on conversion projects like Sunset Village.

"Interest rates are not expected to rise enough to impact the relatively small number of units offered in this development, Gunther tells Globest.com. "In addition, as units will be available quickly, the sellout period should not extend far into the future."