ANAX Real Estate Partners, a New York City-based construction and development firm, sees more opportunity to deploy rescue capital in New York’s commercial real estate market.
“If you look at the marketplace on a macro scale, [the overriding question] is where can we make money in real estate today? There’s industrial, sure, but everywhere else [in New York] is under some type of stress and pressure,” Eric Brody, founder and principal, told Real Estate Capital USA. “This is why we started to look into the rescue capital [and] gap capital space.”
Brody believes gap financing, including preferred equity, bridge and mezzanine financing, presents solid opportunities for returns in today’s market. He also is of the mindset that New York’s road to recovery will be a bit longer than some anticipated.
“We believe [in] urbanization, and we believe that New York City will come back,” Brody said. “It’s just the time horizon isn’t one to three years. We think it is three to five years.”
Brody and his partner, Marc Dupiton, set up ANAX in a bid to unite two normally disparate aspects of real estate – construction and technology. “We launched ANAX partners to come up with a different way in which to really understand the market to create our own data and our own platform with which to work,” Brody added.
He continued: “A lot of our merchant development peers started to approach me saying, ‘We have these cash in-refinancing [opportunities], we are getting foreclosed down, we have to file bankruptcy.’ And we started to see on a macro scale this massive opportunity in New York City which is these are viable assets,” Brody said.
The firm initially used a variety of platforms, including TV and podcasts, to project the message that ANAX is interested in rescue capital-type deals. The business also made use of its own CRM and an algorithm in house that finds precursors to distress. “What we’re finding is many different types of stressful situations, but strictly the rescue capital fund is for the New York marketplace,” Brody added.
ANAX wants to be active at a time when buildings that are sound are facing financial dislocation.
“When bad things happen to good buildings it does not mean there is a fundamental flaw with the project or the sponsor, but it’s possibly the wrong time – nobody predicted rates would rise so quickly,” Brody said.
This has led to a situation in which market participants are required to put cash into a project instead of being able to take cash out. “I feel like that’s going to be one of the big trends we see until the market is more stable,” he said.