Hudson Realty celebrates $120m in deals in first year - Banking & Finance

Real Estate Weekly, Jan 14, 2004

During its first 12 months of formal operation, Hudson Realty Capital LLC (HRC) closed $120 million in debt, subordinate debt, whole loan purchase and equity transactions, announced Spencer Garfield, managing director. A joint venture between SWH Funding Corp. and Newbridge Realty Capital, HRC is the sponsor of two high-yield real estate funds: the Hudson Debt Fund I LLC, and the Hudson Opportunity Fund I LLC.

HRC and its sponsors collectively have closed more than $300 million in transactions within the last 18 months. In addition, HRC has a pipeline of more than $150 million in potential new loan originations and equity transactions currently in due-diligence.

The Hudson Debt Fund makes high-yield bridge and mezzanine loans while the Hudson Opportunity Fund invests, on a leveraged basis, directly in real estate and acquires under-performing mortgages and other real estate-related instruments.

"We are involved in everything from land development in southern California, home building in Arizona, to first mortgages in New York and mezzanine financing in Florida," Garfield explained.

"This diversity and our flexibility, which have been the keys to our rapid success during the past year, enable us to get involved in any project that we believe will yield the right risk-adjusted return."

The firm's 2003 transactional highlights include the purchase of a 900,000- square-foot suburban Atlanta office park, the purchase of a $13.5 million sub-performing note secured by two assets in New Jersey, a $15.25 million high-yield bridge loan secured by condominiums in Brooklyn and a $7.75 million mezzanine loan secured by shopping centers in Pennsylvania.

According to Garfield, HRC has emerged as a dominant national player in the $5 million to $25 million high-yield loan arena. "Our activity has exceeded all expectations," he noted. "In fact, we recently added two new colleagues with solid industry experience, Robert Perelman and Karim Demirdache, to handle the current business flow, which we expect will accelerate through 2004." Garfield cited a recent tightening of underwriting standards by traditional lenders as a catalyst for many borrowers inability to procure conventional financing.

"This has created increased need for non-traditional financing in the form of high- yield bridge loans and mezzanine financing providing borrowers with more time, money and flexibility to achieve their business plans," he explained.

"We also are seeing increased demand for both mezzanine financing and bridge loans from borrowers seeking to acquire out-of-favor assets such as, vacant or partially vacant office properties, hotels or un-anchored retail properties."

Garfield added that ongoing mergers and acquisitions among banks may further limit traditional financing sources during 2004, and the resulting larger institutions are likely to focus their attention on larger loan opportunities. "This will reduce the number of options for smaller borrowers seeking financing of less than $15 million," he said. "This, in turn, will create more business for high-yield lenders, like us, who offer highly structured financial products, along with speed and surety of execution."

Prior to forming HRC, SWH Funding Corp. and Newbridge Realty Capital teamed in a variety of joint transactions.