Where Equity Is Most Needed
There's a hole out there in equity investing for those looking for a $3M to $10M boost. Massey Knakal intends to fill it via a $50M fund with RiverOak Investments that provides gap financing for projects that need a little support (not every financing problem can be solved with Indiegogo).
This morning, we snapped CEO Paul Massey in his firm's 275 Madison office, where he told us MKRO has raised $20M and made one investment, in Harlem. Sponsor investors may be able to raise a few million from friends and family or go to the Angelo Gordons and Blackstones for, say, $20M. But it's tough for solo sponsors to raise $3M to $10. So MKRO intends to distribute the $50M over 10 to 12 value-add deals alongside the sponsors, leveraging up on the property level to a typical 50% to 60% LTV. The fund will wrap up in eight years.
Paul tells us Massey Knakal's principals and other employees (like James Nelson, whom we also snapped this morning) have thrown down and RiverOak has a pool of ready-to-go investors, and yet half the money raised so far has come from "friendly brokers" from other firms. MKRO's Harlem deal is a $3.7M injection alongside the sponsor's $21.3M, for 197 units across four apartment buildings. Paul says they're 98% occupied, and the value-add will come from more attentive management.