Thorofare Capital has raised $400m (€311m) of institutional capital to invest in floating-rate real estate bridge loans in the US.
The Los Angeles-based investment manager is hoping to take advantage of the growth in value-added real estate investments.
Thorofare Capital has established a platform dedicated to floating-rate loans with senior status in value-added situations.
CEO Kevin Miller said the new strategy was “natural extension” of Thorofare’s existing fixed-rate opportunistic debt platform and would target borrowers seeking “to execute more value-added strategies in a strengthening capital market”.
The floating-rate bridge loan strategy is “100% funded by institutions,” said Garett Bjorkman, Thorofare’s director responsible for investor relations and strategic capital relationships.
Miller said the firm decided to implement the new strategy to meet institutions’ “high demand for current income”.
The programme will focus on senior loans of $5m to $25m with average durations between two and five years, interest rates starting at 5.5% and advance rates up to a 75% loan-to-value.
Potential asset classes will include multifamily, retail, industrial, hospitality, office, and certain specialty asset classes.
The platform will also have the flexibility to finance non-performing loan acquisitions, discounted note payoffs, and note portfolios.
Founded in 2010, Thorofare has raised over $515m in three previous funds.
Earlier this year, Thorofare was said to be targeting total returns of 10% or more by providing financing to investors to buy non-performing loans previously owned by the Federal Deposit Insurance Corporation.
Thorofare’s loans in those situations are highly structured, including holdbacks and reserves, durations of less than two years, and mostly interest-only payment requirements. Rates on Thorofare’s loans in these transactions are generally between 5.5% and 12%, depending on the risk of the borrower’s business plan, which is the key variable in turnaround situations.
Thorofare says it has an advantage over traditional lenders in the form of speed of execution. The company can close loans rapidly to met the short timeframes typically required in non-performing transactions.
Banks typically issue terms only after borrowers have a financing contract in place and often demand another 30 days or more to close deals. Thorofare will provide a commitment to a borrower at a loan auction, which enables the borrower to close the transaction within 10 days.