The time is ripe for such a venture, in the view of Daniel and the founders of KPO Ventures, two former partners at multi-billion-dollar hedge funds. "Obviously, the current environment is very conducive for private lending, due to the fact that there's no capital out there," says Daniel.
Concurrently, KPO's principals "believe very strongly in the opportunity for real estate lending--acquiring distressed notes, lending on distressed notes, etc.," he says. "They have put up a lot of their own capital and have another consortium of capital along with theirs to go out and do deals like this. So they've earmarked $100 million to get going and see what we can do."
For Silo and KPO, non-performing loans represent two opportunities. "One is that borrowers are afforded the opportunity to get a discount on their note," says Daniel. "Assuming there's value in the real estate, they need capital to take advantage of the opportunity. That's where we come in. We help them refinance it at a discount, buy it at a discount or whatever best fits the deal."
In the second scenario, "we have situations where banks or institutions are selling non-performing loans. There, we're a direct buyer, or we'll lend against or participate in the acquisition."
With the venture announced only a few days ago, it hasn't yet struck any deals. "We think many people would agree that up until now, everything has been in a gridlock," Daniel says. "We believe there will be factors in the near term that are going to cause a lot of transactions to occur: institutions and banks that will no longer hold onto these assets and need to shed them, or borrowers that can no longer hold onto properties, leading to defaults in the commercial sector. So we feel the gates will be opening soon, and we'll deploy this over the next nine to 12 months."
Established in 2001, Silo specializes in providing short-term bridge loans secured by most types of commercial and investment property, focusing on loans from $750,000 to $20 million, including special situation, time-critical and difficult financing. Daniel himself has 15 years' experience in this area.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
