WASHINGTON, DC—Last week's announcement that Northridge Capital was kicking in the equity portion for Fortis Cos.'s Pullman Place project in NoMa was just the tip of the ice burg of an emerging local capital finance trend -- at least from MAC Realty's perspective, the company that secured Northridge Capital as the equity provider on behalf of Fortis.
That trend would be an appetite by foreign investors for local boutique-sized apartment and condo deals. While it is a given that foreign institutional investment views DC as a favored destination, traditionally these entities -- such as sovereign wealth funds and foreign pensions funds -- have tended to go big. They have no choice in many ways -- with so much capital to place, the larger deals are the most efficient.
That is changing to a degree, although larger deals will always be their main focus. MAC Realty says that SWFs and other institutional investors are among the foreign sources it has been tapping for the boutique deals as well as high net worth individuals, which are more inclined to invest in such deals. "We are seeing demand from all sources," Andrew McAllister, executive director of MAC Realty Advisors, tells GlobeSt.com.
Northridge Capital is a case in point. Based in Washington DC-based, the real estate asset management firm places foreign capital from both institutional capital and individual sources, according to its website. It has been, perhaps, an augur of this trend of boutique financing. The company launched with the goal of targeting those deals.
MAC Realty reports that it is currently arranging $850 million in apartment and construction financing for DC area apartments and condos. Of that amount, 10% to 20% is coming from foreign investors or entities that represent foreign investors. And of that percentage of foreign investment, "half to most are interested in boutique deals," McAllister says.
He defines boutique deals as between 50 to 100 units. Many are part of urban infill mixed use developments.
The capital is coming from everywhere, he says, across the US and from Asia, South America and Europe.
MAC is currently financing several luxury condominium developments in the Washington, DC area from Georgetown, U Street, to H Street and Northern Virginia and Bethesda.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
