Page 20 - RE-NJ

18 MARCH 2024
FILLING A NEED
Nearly $1.5 trillion of commercial real estate debt is due to mature within
the next two years, Denholtz Properties 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.
said. The program started with a limited raise of capital, he added, but “now that we know that there’s a market out there for what we’re trying to do, we’re going a little more aggressively to find capital partners.”
“That was the strategy from an asset standpoint,” Denholtz said. “And from an investment capital standpoint, it was very tough
to make deals work, and our partners are always pressing us for transactions — we had a couple of great sales (last year), so people wanted to reinvest their money — so we thought that this was the best investment strategy.”
The platform hinges largely on
the firm’s in-house expertise. The company is vertically integrated with professionals in development and construction, leasing, property management and capital markets, among other functions, Cassidy said, so “we like to remind everybody that we’re doing more than just raising capital.”
That means Denholtz is “providing
that background as operators, putting ourselves in position if they fail to pick up the pieces.” Equally important, he said, “we’re relationship people and consider ourselves community players and community members wherever we’re doing business.”
“We’re also helping people save their reputations because, if you’re a developer and you fail in a project, even in a tough market, unless you’re a really big company, that’s lights out for you, so to speak, in terms of your ability to do the next project,” Cassidy said. “So we’re not doing it for charity, we’re doing it
for profit, but we believe in the long run that building relationships and staying active in your community is going to yield great results for us as a company.”
That also makes the rescue fund significantly different from the strategy of so-called hard money lenders, which typically charge higher fees and interest rates than banks and are willing to offer fast, flexible loans, but come with higher default rates. Both Denholtz and Cassidy described it as a more collaborative approach, specifically with projects that the firm knows it can tackle.
“If someone is going to work with a hard money lender, it’s going to be a financial relationship only,” Cassidy said. “What we bring is really deep knowledge and understanding about all the things that they might be experiencing. We’ve had our own trials and tribulations over our careers, so I think we approach
it with a better mindset toward actually helping get to the end of the project, as opposed to a hard money lender who is really just trying to maximize their return.”
And while Denholtz said the rescue fund will cover “a relatively short investment period,” he expects it to remain active long enough to help bring projects to fruition.
“We don’t know how long this market will go on, but we think
it’s got at least another year or
year and a half,” he said. “That’s
our investment period, and the strategy is really just to stabilize and transition the assets, so I would say we hope to be out of everything in four years.” RE ”