Capital Spotlight – We regularly publish the detailed criteria of our most unique real estate capital sources.
The investor is a single-family-office-backed investment fund specializing in structured real estate equity and specialty corporate credit. The investor aims to be a single equity capital solution for established sponsors with net worth of $5MM or greater. While the mid-teens pricing may look steep at first glance, it can be substantially cheaper from an IRR standpoint than raising common equity, and can cover 100% of the equity requirements for new deals. This capital can be used for projects during their greatest period of value creation, including ground up projects. Most importantly, it is non-dilutive equity capital.
| Collateral Requirement / Capital Type | Preferred equity; cross-collateralized with a sponsor’s portfolio equity positions via pledge of proceeds (an unrecorded “soft” pledge). These equity positions can either be wholly owned properties or partnership positions. |
| Geography | Nationwide; willing to consider tertiary markets if the sponsor’s portfolio and experience are complementary to a particular market. |
| Property Types | Will consider all property types. |
| Uses of Funds | Flexible – Acquisition, construction, soft costs, capital expenditures, and closing costs. |
| Sponsorship | Require some experience, but underwriting is mostly collateral based. |
| Recourse | Prefer some level of personal guarantees, but non-recourse is available. |
| Check Size | $1,000,000 – $10,000,000 |
| Loan to Value | Up to 90% loan to cost, on a last dollar basis, with no co-investment required. Additional collateral required: loan is sized based on 50% of net equity value of sponsor’s equity positions in their portfolio. |
| Rate | 15% – 16% Accrued |
| Fees | 1% |
| Payment Structure | Ranges from full accrual to 8% current payments. |
| Duration | Two years, extendable to three years. |
| Prepayment Structure | Usually 12 – 18 months minimum interest. |
| Underwriting Requirements | Ideally, there is current cash flow on the sponsor’s portfolio of assets (the cross-collateral). For “tougher” asset classes like hospitality, retail, and some owner-operated property types, Investor will be choosier on deals and this can be mitigated with strong sponsorship track record. Typically, does not invest behind private lenders and prefers institutional senior debt. |
| Deposits | Generally $15,000 in order to cover legal and any third-party reports. Appraisals are not usually required. |
| Closing Timeframe | 30 – 45 Days |
If this capital source is of interest, book a call to discuss a potential capital arrangement.