Another apartment owner has decided to jump into the pref equity game.
Forum Investment Group, owner of 3,805 units across nine states, closed on a $226 million investment vehicle specializing in multifamily private credit last month.
The strategy, directed at both institutional and advised investors, was launched as a five-year investment vehicle with a target of $100 million to make loans to property owners and developers, Forum Chief Investment Officer Jay Miller told Multifamily Dive.
With the investment vehicle, Forum will provide mezzanine debt, preferred equity, participating preferred equity and joint-venture equity for ground-up developments, value-add repositionings and acquisitions of multifamily properties.
“The rising cost of debt and tighter lending standards have created challenges for developers seeking construction debt and property owners seeking refinancing,” Miller said. “This has opened opportunities for alternative lenders and new lending joint ventures to provide ‘gap capital’ to property owners facing loan maturities.”
Even with the move into gap financing, Forum is still eyeing opportunities to buy apartments.
“While private lenders are capitalizing on the current market conditions by developing dedicated credit strategies for the real assets market via high-yield real estate debt, we also believe this will create an opportunity for equity investors to acquire properties at a low basis, adding an equity investment opportunity to the gap capital lending opportunity we already see play out,” Miller said.
Forum isn’t alone in offering bridge financing. In September, Atlanta-based Cortland, the eighth-largest apartment owner in the country with 80,000-plus homes, announced a programmatic joint venture with private investment firm Declaration Partners Real Estate to invest preferred equity capital in multifamily real estate assets.
The venture with DPRE, which is backed by David M. Rubenstein, co-founder and co-chairman of Washington, D.C.-based financial services firm The Carlyle Group, has initial capital of $100 million and will seek to provide fixed-income principal investments of between $5 million and $35 million that are subordinate to debt from senior lenders. Over the past five years, the two firms have invested in several multifamily assets.
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