AFC Launches Program to Invest $500M

NEW YORK CITY-AFC Realty Capital has established the AFC Co-Sponsor Investment Program. The program was developed to invest in more than $500 million of transactions in 2008, according to AFC principals Paul Fried and Michael Sonnabend.

Fried tells GlobeSt.com that the reasoning behind launching this program is that AFC views the current market as a “deleveraging cycle.” In other words, “in this cycle, the capital markets are looking to provide less capital–less ‘leverage’–as a primary means of lending ‘defensively,’ more conservatively and more safely.” He notes that references to “capital crunch” and “credit crunch” for example, are “just a prominent part of the deleveraging of US real estate assets. In light of concerns of a slowing economy, this is understandable.” Fried continues that “if a slowing economy means that real estate assets will experience declining cash flows–or at least not the growth that was projected during the prior ‘aggressive’ growth cycle–one way to provide capital but defend against declining cash flows is to provide less capital, whether in the form of debt or equity.”

He explains that in light of this trend among capital providers, AFC’s clients and transaction partners are faced with having to provide more capital–sponsor capital–for its transactions. “AFC has typically provided capital in such situations to get its clients’ and partners’ transactions closed.”