- What Fund is structured with more than $120 million of equity, with another $180 million of capacity available
- Why Elevated interest rates have created opportunities to provide credit to owners facing refinancing challenges
- What next Fund is earmarked mostly for the Greater Toronto Area and concentrates on middle-market deals
Firm Capital Corp. has launched a fund focused on real estate distressed credit, rescue capital and special credit situations, boasting an investment capacity upwards of $300 million, Green Street News can reveal.
The fund is structured with more than $120 million of limited-partner equity, and a co-investment strategy could provide roughly $180 million of additional capacity. Eli Dadouch, CEO of Firm Capital, and Valentina Kalyk, president and chief investment officer, are leading the investment team, supported by the Firm Capital investment underwriting group.
FC Real Estate Opportunity Fund LP is targeting middle-market industrial, multi-residential and land deals in the Greater Toronto Area. It will invest throughout the capital stack in opportunistic real estate credit and equity. Strategies include buying loans and properties at steep discounts from distressed sellers.
The vehicle is targeting a net return of 15% to 17%.
Firm Capital, which has been in business for 37 years, sees parallels in today’s market with the 1990s, when high interest rates and tighter lending from banks and capital markets led to distressed situations. The company completed over three dozen distressed transactions from 1992 to 2001.
Recently, persistent inflation and elevated interest rates have created opportunities to provide credit to owners facing refinancing challenges.
The fund’s first transaction is a $22.2m first mortgage, structured as a rescue capital transaction for an industrial property in Vaughn, Ont. The asset, at 20 Regina Road, had been subject to a court-appointed receiver, and the Firm Capital funding allowed the borrower to exit the insolvency process.
Ravi Aurora, CEO of Aurora Group, which owns the property, said this type of relief fund gives the debtor a solution when a current creditor is not willing to work with the borrower.
“When there’s a lender who’s using delay tactics to continuously increase the total debt due via accumulation of interest and fees, the debtor is constantly discouraged from their redemption rights or will require more funding due to the lack of cooperation from the current creditor,” Aurora told Green Street News.
“Such relief funds allow the debtor some light of hope in their right of redemption and being able to find a quicker solution to mitigate further costs.”
“There’s a bit of an imbalance between what a debtor’s right is and what a creditor and receiver’s validity is. I assume nine times out of 10, the system sides with the creditor rather than the debtor, even if the delinquency is just a covenant breach or just a matter of the creditor unwilling to work with the debtor on timelines,” he said.
“Without this kind of relief fund, we wouldn’t have been able to find a solution. This fund allowed us the opportunity to fight for our redemption rights with much more certainty.”
The fund is supported by an 11-person real estate investment committee that will provide expertise and transaction knowledge.