NEW YORK CITY-After identifying a void in the small to mid-size transaction market on the capital side, two local investment firms are teaming up to raise $50 million for a new joint venture equity fund. New York City-based Massey Knakal Realty Services and Stamford, CT-based RiverOak Investment Corp. have launched MKRO I, LLC—a fund that will provide gap equity investments for properties located across Manhattan, Brooklyn, Queens and the Bronx.
“There is an enormous need for this in this space,” says James Nelson, a partner at Massey Knakal, who will lead the fund along with RiverOak’s CEO Stephen DeNardo. “This is something that we thought about doing for years.”
The fund team will be made up of George Yerrall from RiverOak, and Robert A. Knakal and Paul J. Massey Jr., who are also members of the general partnership that will sit on the investment committee alongside Nelson and DeNardo. The fund, Nelson tells GlobeSt.com, will focus on equity investments and not the asset level in order to avoid potential conflicts.
Before exploring a JV option, Nelson says that Massey Knakal considered developing the fund in-house, but after evaluating the plan, “it did not make sense,” he says.
“Investors want to see a track record,” Nelson says. “We started to do research to see who else was in the space, and there was really no one in this space except for RiverOak,” noting the company’s 13 years of experience in the business. “They’ve had a great track record and they’ve had great returns for their investors.”
With RiverOak’s reputation and Massey Knakal’s local expertise in the New York market, Nelson says synergies were achieved between the two companies. “They had been making equity investments up and down the Northeast coast, and they had made a couple investments in New York City, but the barriers to entry in New York City are pretty high,” he says. “There was a limit to what they could do. They seemed like such a logical partner for us because they had the infrastructure, the expertise and the track record, and we’ll have the deal sourcing capabilities and also able to perform the due diligence, both on investment and the sponsors.”
DeNardo—who met up with the Massey Knakal team through mutual clients— describes the partnership as “quite coincidental” and “sort of serendipitous.”
"Though we’ve known of each other, it made a lot of sense for us because we very much want to do deals or transactions that are off-market as much as possible, and nobody has the reach of Massey Knakal in New York City for the size deals that we want to do, which are basically $25 million and under in total capitalization," he says. "We felt it was really a natural fit.”
DeNardo says the JV is planning to have a first close at $10 million within the next 30 days, and a final closing by fourth quarter 2012. “From there, I think it will move fairly quickly once people see us starting to invest in deals and so on,” he says. “There is no hard and fast date, but hopefully by the end of the year, we’ll be there.”
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