Equity Structure. Each investment is made through a separate joint venture established at the property level. All mortgages are also arranged at the property level, with the terms of each financing customized to suit the particular investment objectives and circumstances of the property. The joint ventures are typically structured as either a limited partnership or limited liability company, with both the joint venture partner and a wholly-owned subsidiary of CRE equity serving as a general partner or manager. Typically, the joint venture partner participates in the economic returns of the property investment after a preferred return has been made to the equity investors.
Value Added Investments.
Development satisfies unmet demand
Development conducted in areas with barriers to entry
Property requires substantial renovation, repositioning, recapitalization or financial restructuring
Property has unrealized potential
Purchase price is below replacement cost
Property is located in a growth area
Current owner is motivated to sell
Focus on properties owned by motivated sellers unable to refinance and lenders with delinquent loans that cannot be extended
• Mid-size properties, typically requiring an equity commitment of $4-12 million, with total cost generally between $10-30 million
• Joint venture partner equity contribution, often equal to 10% of total equity commitment
• Property holding period generally 3-7 years
• Preferred leverage ratio of 60%-75%