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.