Canyon Partners to expand secondary city footprint

The firm is also seeing increased borrower focus on speed of execution.

Los Angeles-based Canyon Partners is aiming to grow its exposure to secondary markets, initiating its new focus with a deal under way in Salt Lake City.

The US-focused private equity firm is looking outside of traditional gateway markets in favor of cities such as Salt Lake City, parts of Florida, Sacramento, Raleigh, Charlotte, Atlanta, Nashville and parts of Texas.

“We’ve spent a lot of time expanding our footprint in these markets due to long-term, interesting trends,” the firm’s co-head of real estate Robin Potts told Real Estate Capital USA. 

Canyon is active across mezzanine and senior loans as well as preferred equity investments, spanning all major commercial property types, including industrial, office, retail and hospitality. The firm is not competing in the stabilized financing space.

In July, Canyon provided a $51 million mezzanine loan for a multifamily project in Queens, New York, alongside an established New York-based sponsor and a senior bank lender.

“This was financing a large-scale project where there was space within the market for this product type from a new supply perspective; the fundamentals were very interesting, and the sponsor was a specialist in both multifamily and the New York market,” said Maria Stamolis, co-head of real estate.

Canyon has observed increased focus on speed of execution in the lending market during recent months.

“There is a depth of opportunity within the financing market available for debt investors currently,” said Potts. “Being very clear about what fits for your program and having a streamlined approval process as a debt provider is meaningful for borrowers. There’s been a proliferation of debt vehicles, and as a result, borrowers are more aware of efficient execution than ever.”

Another observation is that real rates remain quite negative from a fixed income perspective, while real estate offers interesting and compelling yield compared to other asset classes.

“We believe, based on the types of deals we are pursuing and our underwriting, and our asset management processes from a risk mitigation perspective, the overall risk-return profile is one of the most compelling within the broader fixed-income spectrum, which is an area of continued focus and growth for Canyon,” Stamolis added.