Boca Raton, FL, Aug 22, 2018: QuickLiquidity, a private equity firm investing in commercial real estate nationwide, has announced that it has purchased a non-controlling ownership interest in an existing real estate partnership for $2 million. The partnership owns a 300-unit apartment community located in Broward County, Florida.
The apartment community was purchased by an experienced multi-family owner in 2014 as a value-add investment opportunity due to the property having a below market occupancy and extensive deferred maintenance. Over the past four years, substantial renovations were made to the entire property, allowing the owner to stabilize the occupancy and increase the rents to market rate. This significantly increased the property’s income and therefore the property value rose. With the owner’s low basis and a greatly increased value, the property had an enormous amount of equity.
The owner wanted to monetize a portion of their equity in order to continue their growth through additional multi-family acquisitions. However, the apartment community is encumbered by a first mortgage which has a costly prepayment penalty, leaving the owner with a limited amount of financially feasible options to turn their equity into liquidity. If the owner were to refinance their existing mortgage, the prepayment penalty and closing costs would be excessive compared to the relatively small amount of cash the owner was looking to pull out. With a new first mortgage the owner would also lose their attractive low fixed interest rate.
QuickLiquidity offered a solution by purchasing a non-controlling ownership interest in the partnership for $2 million. Despite the first mortgage’s restrictions, it specifically allows for the sale and transfer of a non-controlling interest. This saved the owner an exorbitant amount of money by avoiding the prepayment penalty while providing them with the capital they needed in the time frame they needed. It has also allowed the owner to maintain majority ownership and control of their property.
“We have a tremendous amount of experience working with commercial real estate owners and limited partners who have a significant portion of equity in their property but few ways to monetize it,” says A. Yoni Miller, Principal of QuickLiquidity. "As a direct lender and equity investor, we have the flexibility to structure our investments in creative ways that provide our clients the liquidity they are looking for without disturbing their existing first mortgage."
QuickLiquidity has worked diligently with the owner to ensure that the transfer was done in full compliance with all of the loan documents and the operating agreement. It took only three weeks for the property to be underwritten and the investment to be documented and closed.
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