By Joshua Burd
Denholtz Properties has launched what it’s describing as a rescue capital fund aimed at helping commercial real estate operators who are grappling with the market’s financial challenges.
The Red Bank-based firm said the vehicle, known as the Denholtz Opportunity Fund II, will provide funds ranging from $5 million to $25 million per project in the form of preferred equity or mezzanine debt, subordinate only to first mortgage debt. It’s targeting geographies including New York, New Jersey, Pennsylvania, Florida and the Southeast, as it looks to support property owners facing temporary capital challenges such as operating deficits, refinancing obstacles, unmet sale projections, cost overruns and leasing below initial estimates.
Denholtz Properties CEO Steven Denholtz and President Stephen Cassidy will manage the fund, they said, drawing on the firm’s experience in asset management and real estate.
“As owners ourselves, we are acutely aware of the capital challenges today’s macroeconomic environment brings to owners and developers,” Denholtz said. “We are proud to introduce our bespoke rescue capital solutions to the commercial real estate community to help companies find success in a difficult market.”
Nearly $1.5 trillion of commercial real estate debt is due to mature within the next two years, Denholtz said, citing data from J.P. Morgan Private Bank. Yet the Mortgage Bankers Association anticipates a 38 percent decline in commercial and multifamily mortgage borrowing and lending from 2022 to 2023, meaning there will be an exponential increase in the need for preferred equity and mezzanine debt to bridge the current challenges facing property owners.
“The financing gap has been driven by a multitude of factors including interest rate hikes and several high-profile commercial banking failures in the first half of 2023,” Cassidy said. “As a result, many operators continue to be faced with temporary challenges in securing needed financing for under-construction or operational buildings. Our rescue capital platform is designed to provide immediate financial assistance to help close the financial gap and help commercial real estate developers and operators bring their projects to life.”
