The funding was arranged by Houston-based HFBE Capital LP, an affiliate of Howard Frazier Barker Elliott Inc., a valuation advisory and investment banking firm. The equity investment represents one of the largest real estate investments this year, according to David Kulkarni, senior managing director of HFBE who advised Summit Housing Partners.
Based in Montgomery, AL, Summit Housing Partners is focused on creating affordable and workforce housing. Summit owns and operates 85 multifamily communities totaling roughly 13,000 units. Most of assets are B and C properties.
Kulkarni tells GlobeSt.com that Summit Housing Partners initially wanted HFBE to find only $45 million in equity funding, Kulkarni says. However, after the two companies sat down and reviewed Summit Housing Partners' business plan, Kulkarni determined that HFBE could raise much more than that amount.
Kulkarni says HFBE felt that the most efficient way to fulfill the company's funding requirement was to obtain equity from a single source. The HFBE team worked on the funding assignment for five months, targeting only one investor, Rothschild Realty. The investor expects a cash-on-cash return of 9% and capital appreciation in the mid- to upper-teens, he notes.
Summit Housing Partners will leverage the $100-million equity investment with debt from Freddie Mac, Fannie Mae and HUD. Together, the equity and debt funding will enable the company to acquire about $250 million in additional properties, mainly in the southeast, but as far west as Texas.
Kulkarni says the investment horizon is five years, and that private equity investor took shares in Summit in exchange for the funding and also received board representation. The exit strategy will likely involve an initial public offering, he adds.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
