REPE Investment Criteria
I'm considering joining a financial intermediary as an originator covering secondary/tertiary markets. I'll be sourcing both debt and equity for investors and developers. My understanding is that 75-90% of my time will be spent arranging first mortgages. That said, I find the the equity/mezz/bridge portion of the capital stack very interesting.
What types of REPE funds consider investments in secondary/tertiary markets and what types of property do they consider most? What, typically, are the minimum investment amounts?
Most of the properties that I'll be working on will be in the $2-20 million range.
anyone?
The cheeky answer to your question of "what types of REPE funds invest in secondary and tertiary markets" is...the ones that invest in secondary and tertiary markets. As a whole, most of the large, better-known funds tend to focus on the primary markets or on large-scale platform/portfolio investments. The sort of private capital investors in small, secondary/tertiary market deals are likely to be private investors, local operators, and the handful of funds that have raised money to invest in those secondary and tertiary markets (going back to my original, not-so-insightful answer).
As for minimum investment amounts, I think for most reasonably large private equity funds or institutional investors generally, $20mm is probably the minimum equity check...maybe a little smaller for a great deal. Below that size, even an investment with decent returns can't generate the nominal profit required to justify the base level of cost (attorneys, investment professionals, etc.) to do a deal.
Thanks. That all makes sense and is as I assumed. I guess I should have been more clear. Specifically, what size of funds consider these smaller markets? In the 50-100mm aum range? Even smaller? Are they likely only looking for value add/ opportunistic plays, or would they also look at core (for the market) type properties.
I understand that this is highly subjective and every fund has different criteria, just looking for some generalizations.
As a heads up, since you'd be doing loans as well, you could encounter a similar phenomenon among lenders. You might think you have a great deal in Lafayette, LA that's 100% occupied, and there's nothing wrong with Lafayette (over half a million people there) - but the mere fact that it's in Lafayette could scare off a BUNCH of lenders. And the lenders who would be interested would not be the same guys with a minimum loan amount of $10m.
thanks. It's actually at a very well known national firm at one of their smaller offices, they have pretty decent volume every year, and relationships with life cos and others that invest in the market. i know that it will be far and few between doing any equity deals but they'll be fun to work on when they do. think I'm going to take the offer
In Europe, anyone who's hopped up the risk curve, seeking distressed assets from develeraging and financial dislocation, is a cross-border investor. I can't help with the US, but for Europe, this website should show you how funds are classified by style. INREV dot org., then hover over the 'guidelines' link, and go to the fund style document. Additionally, if you type into the searchbar 'snapshot comparison', the top link will show you how European funds are acting. Hope this helps.
djc - did you take the job?
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