Commercial Real Estate Direct: Broadshore-Led Venture Pursues Multifamily Investments in Southeast, Western U.S.

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Commercial Real Estate Direct: Broadshore-Led Venture Pursues Multifamily Investments in Southeast, Western U.S.

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Commercial Real Estate Direct Staff Report

Broadshore Capital Partners, the former Lowe Enterprises Investors, has formed a venture with an institutional investor to make up to $900 million of equity and debt investments in multifamily properties in the Southeastern and Western United States.

The venture closed on its initial purchase last Friday, paying $37.1 million, or $132,500/unit, for the 280-unit Victoria at Orange Park in Jacksonville, Fla. It had completed its due diligence before the coronavirus pandemic took hold and secured a loan from Freddie Mac for about 60 percent of the
acquisition cost.

“I would be disingenuous to say I wasn’t nervous” about the loan closing, said Bradford Howe, co-chief executive of the Los Angeles investment manager. “But (Freddie Mac) did exactly what they said they’d do.”

Howe expects the venture will not make any further investments as long as social distancing measures are in place. He shares the chief executive title with Bleecker Seaman. Both, along with members of the company’s asset management and acquisitions teams personally visit every prospective acquisition. If it’s unable to do that, the company cannot complete any new investments until travel restrictions are lifted.

But Howe expects that by the late summer or early fall, he and his team will be able to resume travel and find attractive investments as squeezed property owners might be willing to sell or recapitalize their properties.

“We’re all in unchartered territory right now,” he said. But, as a veteran of the commercial real estate industry since the early 1990s, he’s been through a number of cycles. “I’ve been around this business long enough to know that when there’s significant disruptions like this, it leads to compelling opportunities if you can move quickly.”

The venture primarily will acquire properties, but it might also originate or acquire debt or make preferred-equity investments. It plans on making a total of eight to 12 investments of between $35 million and $75 million apiece within the next two years. It is pursuing properties with between 200 and 400 units that were constructed in the 1980s or 1990s and occupied by renters by necessity, meaning those unable to buy single-family homes in their areas.

The Broadshore-led venture plans on upgrading units and amenities at the properties it buys, but keeping
their monthly rents a few hundred dollars below newly-constructed buildings. Its target markets include
Atlanta; Charlotte, N.C.; Denver; Jacksonville; Portland, Ore.; Raleigh, N.C.; Tampa, Fla.; Salt Lake
City; and Seattle.

Broadshore adopted its new name last year following Guardian Life Insurance Co. of America’s purchase of the stake in the company previously held by Lowe Enterprises. Guardian in 2010 had made its first investment in the company, which was founded in 1989. Guardian now owns an 80 percent stake, with Broadshore’s management owning the remainder.

Broadshore has about $1.6 billion of assets under management, of which $600 million is in the multifamily sector. Its portfolio consists of about 2,800 units, and it typically obtains financing from Freddie or Fannie Mae.

The company has implemented a policy of not evicting tenants and will work with renters who have trouble making their monthly payments due to the coronavirus outbreak.

It invests through separate accounts and through ventures with institutions. It also invests in the hotel, seniors-housing and office sectors and originates and acquires bridge loans and mezzanine debt. But its focus is currently on the multifamily sector.

That’s where the company sees the best opportunities. “We think multifamily continues to have strong demographic support,” Howe said. “We like the long-term characteristics” of the property sector.

Comments? E-mail Tim Casey (tim.casey@crenews.com) or call him at (267) 397-3347.

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