LoanCore's Liability, Fundraising Slump & Colliers M&A Cry

LoanCore’s Liability

In Feb. ‘22, LoanCore, a debt fund founded by Mark Finerman, issued $145M floating-rate 💸 debt to Alan Stalcup’s GVA for a 3-complex multifamily acquisition in Texas and the Carolinas. The debt penciled out to about $170K/unit, and was part of a wave of deals between the fund and one of the country’s most ravenous multifamily syndicators.

“Post-renovation and upon raising rents to market levels, the Sponsor believes they can achieve average rents of $1,452 per unit ($1.66 psf) for the overall Portfolio, or rent premiums of $254 per unit (21.2%) over in-place rents within the first year,” stated the asset summary report, a copy of which was reviewed by The Promote.      

Do I need to tell you what happened next?

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LoanCore-GVA (cont.)

In April, LoanCore foreclosed on one of the complexes, Midtown Crossing in Raleigh. GVA had paid $54.6M, or $239K a door, for the property; LoanCore picked it up for $30.5M, or $134K a door. Midtown Crossing was part of a mammoth $700M+ GVA acquisition of a 3,500-unit portfolio, funded in large part by LoanCore. There was $148M of equity in the deal, much of it coming from an $88M private offering done by Stalcup.

That portfolio is now in distress, and LoanCore has (reluctantly) moved to foreclose on many of the properties. The power dynamic between syndicators, debt funds and funds’ warehouse lenders is a messy, constantly shifting one – even if the sponsor is a lost cause, a debt fund may opt to keep the charade going in order not to wreck their own warehouse lines with the big banks, as we’ve explored here. And the overall CRE-CLO landscape is bloody, with nearly 40% of such loans on the watchlist, per a new CRED iQ analysis.

Admittedly, analyzing a deal from that euphoric LFG 🚀🚀🚀 era with the benefit of hindsight is a tad unfair. Still, this underwriting is interesting.

As for Stalcup? As of January, he had defaulted on $600M in debt. But it’s worth noting that in the asset summary report, he reported a net worth of $200.6M w $26.4M liquidity as of end of '21. Most loans of this type are non-recourse, so he’s probably alright.   

Rough Patch for Fundraising

Q1 was the softest first quarter for real estate fundraising since 2011, with just $19.8B raised, a 36.5% YoY drop per PERE. Investors are giving office no love, with the %age of capital raised for office-specific funds dropping to zero in Q1 (from 8% in ‘20). Hospitality funds are getting a nice bump, however, representing 15% of $$ raised for sector-specific funds, and industrial was the most popular sector (beating multifamily), bringing in more than half the investor dollars in sector-specific funds (which raised a total of $8.6B).

Also, “opportunistic” was out, “value-add” was in: 6 of the top 10 funds closed in the quarter (Blue Owl, Crow Holdings among them) were value-add funds, representing 71% of total capital raised compared to just 6% for the latter. We’ll see what happens in the next couple quarters though: 7/10 of the funds in the market rn are opportunistic.

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Colliers M&A Hungry

It is hard to get excited about something a Canadian business does, but Colliers wants you to believe: The brokerage, flush with a $300M equity infusion, has a billion dollars to play with, it said on its earnings call Thursday.

“Right now you can you can buy more traditional real estate service businesses at relatively low valuations, for obvious reasons,” CEO Jay Hennick said. The industry has been awaiting some juicy M&A: CBRE’s Bob Sulentic said last spring that the firm planned to send billions on M&A deals; and in Jan., Hunter over at Lewis Enterprises made a case for a Colliers takeover of balance-sheet babysitter Cushman & Wakefield (Readers of The Promote can get a 40% discount 😲 to a LE subscription by going here.)

Quickies

• 📽️ Catch up on the WeWork-Yardi bankruptcy reorg deal in <90s

• Crime, vermin, squatters, debt at SF megacomplex 🦹 🐀 🏦 

• Invitation Homes to manage 4K+ BTR homes as part of JV w Lennar subsidiary Quarterra

• Millenium pulls the plug on $1B+ Hollywood skyscraper project

• An insider’s guide to investing in campgrounds & RV parks ⛺️ 

• California Forever gets enough signatures ✒️ to make it to the ballot: it’s looking to develop 17.5K acres to house 50K residents (if new to the grand experiment, start here and here)

• Fascinating, this: HALF of South Florida’s new condo pipeline is short-term rental friendly

• StoryBuilt receiver “winding down” 👏 👏 👏 with the thankless job of paying back creditors far from done (new to the drama? start here)

• Check us out on the Odd Lots 😍 pod talking the “parallel universe” of ultra-luxe RE

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