Related Fund Management’s credit platform has provided loans totaling $150m on two development projects – one in New York City and the other in Vail, Colorado – as the year-old group begins to examine a number of new opportunities across the US and a potential foray into Europe, managing director Brian Sedrish told Real Estate Capital.
The platform, a joint venture with Highbridge Principal Strategies created last year, has originated a $60m pre-development bridge loan to New York hotel developer/operator David Marx’s Atria Builders for a planned 400-room Courtyard by Marriott on the northeast corner of 34th Street and 10th Avenue in Manhattan’s North Chelsea neighborhood.
It also partnered with an undisclosed US banking partner to originate a $90m construction loan for the ground-up development of a 79-unit luxury condominium project in Vail, Colorado.
Currently focused on high-yielding mezzanine loans, the platform has now invested nearly $300m of the $800m it has to deploy. Loans have ranged from between one and five years, with pre-development bridge loans typically shorter in duration, with the “expectation that [the sponsor] will roll into a mezzanine position behind a construction loan when the asset’s ready to go vertical,” Sedrish said.
The group targets investments greater than $30m, usually holding a mezzanine portion on deals representing the 65-85% leverage slice in the capital stack, behind a senior lender.
“That’s where the opportunities have been on a relative basis to make attractive risk-adjusted returns,” Sedrish said. “After the downturn many of the commercial banks in that space pulled out… creating a real void in the market.”
But Sedrish – who heads a team of eight focused on debt strategies and was previously head of acquisitions for the Commercial Real Estate Division (Special Situations) at Deutsche Bank – said his lens is widening, as he eyes properties further along in their “life-cycle” and a potential push into Europe in as little as nine months.
“As we get through that capital the expectation is that we’re sure to expand our platform, beyond the construct of providing high-yield mezzanine loans but other strategies as well – mainly being able to have a pocket of capital that allows us to provide mezzanine-type financing on deals that are further along the life-cycle. Those types of opportunities are less risky and by association you need the right pocket of capital to take advantage of them.”
The credit platform will likely look to the UK or perhaps Germany as its European entry-point – following the deployment of the $800m current target.
“Whether we expand abroad? The answer is yes. We are spending a lot of time thinking about how best to do it and we are already looking at a couple of deals there. Clearly, in terms of the life cycle of the distress that occurred, Europe is behind the US and there are definitely opportunities,” he said.
But, he added, “If we’re going to do it we’ll need the right organizational groups on the ground to ensure that we don’t get far afield of what our expertise is, so we’re making sure we have the right resources.”
Related Fund Management, part of prominent New York City-based real estate firm Related Companies, manages approximately $3bn of capital on behalf of sovereign wealth funds, pension plans, multi-managers, endowments and family offices.