Walker & Dunlop, Ivanhoe Cambridge Form Equity Partnership
- Sep 16, 2021
Walker & Dunlop Investment Partners and Ivanhoé Cambridge, which formed a joint venture to make preferred equity investments in multifamily, student housing and manufactured housing properties, have made their first two investments totaling nearly $10 million in Texas and Tennessee.
Executives at both firms said they would be focusing primarily on properties in the top 25 MSAs, particularly in the Southeast, South and Southwest. The first transaction was an approximately $4 million preferred equity investment into a joint venture with Pegasus Real Estate to acquire Collection at Overlook, now rebranded as Cornerstone at Overlook, in San Antonio, Texas.
The 240-unit multifamily property was constructed in the 1980s and is located near a medical center in the city’s northwest section. The second transaction was a $5.6 million preferred equity investment into a joint venture with Valor Residential to acquire Overlook at Farragut, a recently delivered 267-unit multifamily property in the Farragut submarket of Knoxville, Tenn.
“While we are targeting the top 25 MSAs, we’re also open to smaller markets as we anticipate that there might be a demand for what we’re offering in those markets as well,” Charles-Antoine Lussier, senior vice president, Residential and Hotels at Ivanhoé Cambridge, told Multi-Housing News.
The joint venture’s strategy will focus on identifying opportunities with stabilized properties with three-to-10-year investment horizons. The JV aims to address the growing need for flexible gap financing at an attractive cost of capital in a low cap-rate, high-liquidity capital markets environment in the residential space.
“Our JV is designed to provide operating partners with a flexible financing solution able to meet a wide variety of business plans, short and long, with a wide variety of lenders, at a competitive cost of capital,” Sam Isaacson, president of WDIP, a subsidiary of Walker & Dunlop Inc., told MHN.
WDIP is a wholly owned alternative investment manager focused on middle-market commercial real estate investments that was previously known as JCR Capital Investment Corp. and acquired by Walker & Dunlop in 2018.
“For agency financing, with Fannie Mae and Freddie Mac, our JV definitely offers ease of execution and flexibility,” Lussier added.
Lussier said the firm’s partnership with WDIP is part of the company’s broader strategy to further diversity its U.S. residential investment portfolio across markets and risk spectrum.
Two segments of the multifamily market the joint venture is not planning to target at this time are the hot single-family rentals (SFRs) and build-for-rent (BRFs) markets.
“We’ve yet to see demand for stabilized properties and portfolios, but that may change over time,” Isaacson said.
Despite challenges faced by colleges and universities due to the ongoing COVID-19 pandemic and reduced enrollment due to changing demographics, the JV is looking for student housing deals with certain criteria.
“We definitely have a preference for major university markets,” said Lussier.
Isaacson agreed, adding they would be looking for student housing properties near “Power 5 conferences or prestigious universities, ideally within walking distance of campus.”
Last week, Ivanhoé Cambridge, Greystar Real Estate Partners and Bouwinvest Real Estate Investors announced they have agreed to acquire a co-living asset in Paris that could produce more than 370 units for students and young professionals.
The deal is the first for the joint venture since its initial announcement in June 2020 that it was seeking to invest about $1.1 billion to acquire housing for students and young professionals in the greater Paris area.
The two firms have worked together in the past and both executives say they are looking forward to expanding the existing relationship. Isaacson said Walker & Dunlop has provided lending solutions to Ivanhoé Cambridge since at least 2012, when Walker & Dunlop acquired CWCapital LLC, which was owned in part by Ivanhoé Cambridge prior to the acquisition.
In 2017, Walker & Dunlop arranged $1.9 billion in Freddie Mac loans for Greystar and its founding capital partners that included Ivanhoé Cambridge to acquire Monogram Residential Trust, a multifamily REIT.