Spirit Investment, Bascom Team Up for Shopping Spree
- Jan 19, 2012
New York—Spirit Investment Partners LLC and The Bascom Group LLC have teamed up to form a joint venture, Spirit Bascom Ventures LLC, for the purpose of acquiring value-add multifamily properties in the eastern region of the country.
The joint venture will focus its investment efforts on apartment communities that are distressed in some way—be it due to mortgage default, poor lease-up, poor physical condition—and present a value-add opportunity. “Generally the primary markets are just too crowded, there is too much capital chasing too few deals,” David Nachman, a principal with Spirit Investment, tells MHN.
Indeed, the competition to snap up Class A assets in top metropolitan destinations is pushing property price tags higher and higher.
“That’s why we are looking in the secondary markets,” Nachman notes. There’s better pricing in secondary markets than in primary markets like New York, Boston and Washington, D.C. There’s a lot of capital that’s flowing through those markets because there’s a lot of competition. And I think the trend that will continue to happen is that people like ourselves will continue to be frustrated by not being able to find deals that make sense for them and their investors, so there will be more money moving into secondary markets over time. It’s kind of a natural evolution. People follow yield.”
The Midwest, Southeast and East Coast areas are of particular interest to the team. Bascom, based in Irvine, Calif., is eager to expand its presence beyond the West Coast, and New York-based Spirit Investment is plugged into the eastern portion of the United States. “It made perfect sense for us,” he says of the formation of the joint venture. “It was kind of synergistic. We’re in markets they want to be in.”
Spirit and Bascom serve as the co-sponsors of the 50/50 joint venture, functioning in the operating partner position with plans to bring up to 20 percent of equity to the table for each transaction. The majority of the financing will be sourced from equity partners. “Most equity partners only require 10 percent to co-invest,” Nachman explains. “Assuming 20 percent, we’re prepared to put $25 million into our partnership, which you lever with the 80 percent capital. So with joint venture equity plus leverage on the debt side, we can buy $400 to 450 million of properties in the next few years.”