ALEXANDRIA, VA-Federal Capital Partners is playing a small but crucial role in the financing of a $52 million apartment building at Huntington Metro Station: it is kicking in $10 million in mezzanine finance for the 240-unit project’s development. The four-story apartments are being developed by Insight Property Group in partnership with Rock Creek Property Group. RBS Citizens is providing senior construction financing.
It is the second mezz finance transaction FCP has done this year, but certainly won’t be the last. “We’ve done quite a few to date and expect to be active again this year,” FCP Senior Vice President, E.J. Corwin, tells GlobeSt.com.
“We look at the structured platform as another opportunity to put capital to work,” he says. “It is more of an evolution for us than a sharp change.”
It is, in fact, an evolution that many funds and commercial real estate firms are making.
Mezz financing is attracting more players for various reasons, Terrell Gates, CEO and founder of Virtus Real Estate Capital, tells GlobeSt.com. “From industry perspective the industry is becoming more comfortable with risk,” he says. Deals are starting to segment the capital structure more than they have been in recent history.
Then there is the yield such deals offer, which is typically in the low to mid-teens. “There is so little yield in other asset classes, that if you can provide a mezz loan backed by a hard asset and it provide a yield substantially greater than corporate bonds, well, that can be darn compelling to a lot of investors.”