NORTH AMERICA – A joint venture between US real estate development firm Related Companies and Highbridge Principal Strategies, a private investment firm, closed their first transaction in their new joint venture, a real estate credit investment platform.
A second transaction is expected to close in around two weeks.
Fundraising began in March for the platform, which will target lending to real estate projects that do not have cash flow from assets and are thus closed to securitisation and have recourse to bank lending.
Justin Metz, managing principal at Related Fund Management, said: "Those types of loans are in high demand, but there is a low supply of that kind of capital.
"The banks do not have enough balance-sheet capacity, and a lot of banks have also gotten hurt in the past lending on assets without underlying cash flow."
The joint venture is focusing on gateway cities, as well as certain secondary markets that demonstrate strong supply/demand imbalances.
Explaining this focus, Metz said: "As a developer and operator, we are prepared if a deal does not go well to take it over, and we have execution capabilities in these markets.
"Of course, we hope this will not be the case, but it will be an easy fix for us if it is."
The new venture will complement Related's existing debt platforms.
One, focusing on construction and first mortgage deals, is a lower risk/return profile, and another is more opportunistic, with a higher risk/return profile.
Highbridge is a global credit and private investment firm with $16bn (€12.3bn) under management.
It invests across the capital structure in both public and private markets, including mezzanine debt, speciality direct lending, public credit securities, growth equity and leveraged loans.
The firm was looking to get more into the real estate space, said Metz, and, with its experience in credit and lending, it offered a complementary skill set to Related's real estate expertise.
This is the first such joint venture for Related, and Metz has left the door open to future opportunities.
"There are a lot of groups with complementary expertise," he said. "If this works out, it is something we might try again."