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 Offered | Preferred Equity / LP Equity |
| Geography | TOP 25 MSA’s – Primarily focused on the sunbelt region; willing to invest in Northeast and West Coast. |
| Property Types | Pre-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 Funds | Uses 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. |
| Construction | Light and heavy value-add, Capex |
| Sponsorship | Sponsors 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. |
| Recourse | Non-recourse (“Bad Boys”) |
| Check Size | $10MM to $30MM |
| Loan to Cost / Loan to Value | Acquisition / Recap: 70 – 80% LTC / LTV (Not as concerned with LTV; More focused on Stab. Debt Yield on their last dollar) |
| Sponsorship Equity Contribution | Sponsor must have skin in the game. Ability to write a 10-20% co-invest (flexibility on a deal-by-deal basis) |
| Interest Rate / Returns | Pref 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 Structure | If Sub-debt: 8-10% current pay with balance accruing If LP/GP: Traditional waterfall |
| Term | Target – 5 Yr. Hold Period |
| Prepayment Structure | 1.35x – 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 |
| Deposits | Market standard deposit required upon signing of term sheet to fund appraisal, environmental, title, legal. Deposits are subject to deal size. |
| Closing Time Frame | 30 – 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