DeEquity is a new real estate term I have just learned. There are a
group of investors
looking at our shores to recapitalize projects that have just barely
survived this last downturn in our commercial real estate market. While
not
looking to make first mortgages (the returns are too low) they also are
not
prepared to be at the top of the capital stack (too much risk on loss of
value). These investors are looking for opportunities that are between
55%-
85% of the value of an asset, initially as a mezzanine loan that can be
converted into equity. Investors receive an above average loan return
with
the possibility of becoming a partner or through outright foreclosure on
the
asset. It’s not a passive or easy strategy but it can combine the safety
of a
loan with the high returns of commercial real estate for those prepared
to
work hard if and when things get tough.
