Commercial real estate investment banking services with a creative approach.
One of our primary core competencies is raising limited and general partner equity for Commingled Funds, Programmatic Ventures, Single-source Multi-asset Joint Ventures, and Single-asset Joint Ventures for core-plus, value-add and opportunistic investment strategies. We help our clients select a funding vehicle and design a promote structure best suited to their needs and investment style. Promote structures will vary based on property type, investment strategy, investor requirements, and the fund manager’s track record and reputation, not to mention the marketing savvy, skills and relationships of the fund manager’s investment banker.
We source the equity from our comprehensive data base of some 5,000 institutional, private equity, and family office investors – both domestic and international. At any given time, at least 1500 of these are active. We identify investors with a compatible investment profile offering a cost of capital appropriate for the investment opportunity and negotiate a promote structure that accurately reflects the sponsor's value contribution.
The success of an investment program is profoundly affected by the structure and cost of the debt. Matching the attributes of the credit facility to the business plan of the property or properties is essential. By example, for value-add and opportunistic plays, debt must be flexible and cheap. Turnaround time for loan underwriting and funding must be quick. Unstable properties have inconsistent cash flow, thin debt service coverage ratios, lease rollover exposure, relatively heavy post-acquisition capital requirements to fund lease up, and deferred maintenance and upgrade costs. Holding periods are typically less than five years and have an uncertain exit date.
Palladian can provide a LIBOR-based floating rate facility with a credit line for lease-up costs and property improvements, open prepayment, and the ability to rebalance the loan as value grows. Multiple LIBOR elections and active interest rate risk management deploying multiple interest rate caps (not swaps) keep interest payments low even when rates rise. While it is not always possible to negotiate for all of these features in any given loan, Palladian knows what to ask for, how to structure it, how to pro-actively address creditor issues and which lenders to go to.
Given a growing portfolio of value-add properties, Palladian can build-in additional optionality, improve pricing and even increase loan proceeds by diversifying lender risk. We have structured hybrid loans secured by first mortgage liens for properties acquired free and clear of debt and pledges of partnership interests (or holding company level guarantees in the case of a REIT or Commingled Fund) in lieu of second mortgages, when an acquisition is encumbered by a low LTV CMBS loan with a ruinous prepayment penalty, and multiple LIBOR term elections.
Recapitalization as an Exit Strategy
Consider the stabilized assets in your portfolio that may be ripe for selling. On a property by property basis, are there any you would prefer to retain if you had a more risk averse lower cost long term equity capital source that would recapitalize the existing venture, enable you to cash out your promoted interest at fair market value, reinvest some of the profit and retain the fee income stream and a piece of the upside? Also consider properties in your portfolio with substantial roll over exposure and upside potential that need an infusion of capital to cover tenant re-leasing costs. Do you want to replace your existing partners with “fresh” lower cost capital to fund the rollover cost and realize additional value?
Palladian has successfully recapitalized portfolios for its clients by replacing value-add investors with core plus investors and increasing the debt with a credit facility appropriate for a core-plus asset. Palladian will evaluate your existing portfolio’s suitability for recapitalization on a property by property basis.
We provide clients with proprietary deal flow from motivated sellers and structure complex transactions to solve issues and add value. We orchestrate campaigns to market the assets and the property management services of clients to major investors, banks, and other lenders. We identify acquisition opportunities from the following sources:
Refinancing & Restructuring
Tactical focus areas for our restructuring practice include: