Capital Spotlight – Highlighting featured capital investors. We regularly publish the detailed criteria of our most unique real estate capital sources.

This California-based private equity investment manager provides $10MM-$30MM LP equity and preferred equity investments for hospitality and multifamily acquisitions, recapitalizations, and restructurings. The immediate mandate focuses on 1) Pre-C.O. (6 months or less) multifamily construction projects that need to be recapitalized to complete final stages of construction and achieve stabilization; and 2) traditional value-add multifamily and hospitality acquisitions. They will consider transactions throughout the top 25 MSA’s in the United States, although they’re primarily focusing on the Sunbelt region.

Capital Structures OfferedPreferred Equity / LP Equity
GeographyTOP 25 MSA’s – Primarily focused on the sunbelt region; willing to invest in Northeast and West Coast.
Property TypesPre-C.O. / Pre-Stabilized / Stabilized Multifamily & Hospitality – Traditional Market Rate, Class B+ and A Multifamily, Full Service Flagged Hotel, Limited-Service Flagged Hotels.
Use of FundsUses of funds can be flexible; Primarily looking to fund value-add acquisitions and recaps (also able to fund restructurings). Willing to fund Capex, and construction in select situations. Market rate sponsor fees are allowed for acquisitions.
ConstructionLight and heavy value-add, Capex
SponsorshipSponsors need a demonstrated track record in similar deals. They are ideally capable of providing a 10-20% co-investment, however there is flexibility. Ideally sponsors have the ability to qualify for loans themselves, however depending on the deal profile, the capital source is willing to co-guarantee loans if needed.
RecourseNon-recourse (“Bad Boys”)
Check Size$10MM to $30MM
Loan to Cost / Loan to ValueAcquisition / Recap: 70 – 80% LTC / LTV (Not as concerned with LTV; More focused on Stab. Debt Yield on their last dollar)
Sponsorship Equity ContributionSponsor must have skin in the game. Ability to write a 10-20% co-invest (flexibility on a deal-by-deal basis)
Interest Rate / ReturnsPref Equity: 15-18% (Subject to underwriting and location)

LP Equity: IRRs of 20+% and 2.0x Multiple on 5-year deals

Origination Fees (if sub-debt)1-2 points depending on deal structure (if pref equity)
Payment StructureIf Sub-debt: 8-10% current pay with balance accruing

If LP/GP: Traditional waterfall

TermTarget – 5 Yr. Hold Period
Prepayment Structure1.35x – 1.40x (subject to term, deal profile, and last dollar leverage)
Underwriting Requirements (Based on Investor’s UW)Target last dollar debt yield for sub-debt: 8.0%.
Collateral Requirements (Subordinate Debt Structures)·         Second Mortgage / UCC Lien, Pledge of equity, OR

·         Preferred Equity Units / Unsecured

Intercreditor Requirements / Recognition Agreements (If sub-debt)Negotiated on a deal-by-deal basis if capital is structured as mezzanine or preferred equity
DepositsMarket standard deposit required upon signing of term sheet to fund appraisal, environmental, title, legal. Deposits are subject to deal size.
Closing Time Frame30 – 45 days to close following a signed term sheet.
Approval Process·         1-2 weeks to provide feedback and detailed quote.

·         Following acceptance of quote, Capital source flies/drives to meet sponsor at site. If everything is as-represented, term sheet is officially issued and signed. (Major members of the firm will be at meeting and provide guidance on terms issued on term sheet)

·         Closing process includes completion of final diligence items/3rd parties as well as legal

If this capital source may be of interest, book a call to discuss a potential capital arrangement.

Read our last Capital Spotlight: Tech Co-Founder-Backed Family Office Providing $1MM to $7MM “Soft Pref” Equity Checks for Value-Add Multifamily