Meadow Partners tracks rising differentiation between distressed, rescue capital 

While the tone of the market feels anecdotally better, transaction activity has still not yet picked up.

New York-based Meadow Partners is seeing more of what it believes could be opportunities to deploy rescue capital in properties where the balance sheet – but not the asset – are distressed. 

The firm, which runs a series of opportunistic funds focused on New York and London that target assets across a variety of risk spectrums, is having more conversations with borrowers with assets facing near-term maturities that will need mezzanine debt, preferred equity or even equity to refinance or buy more time to execute a business plan, said Jeffrey Kaplan, managing partner.  

“The primary value we are bringing to the table is the flexibility in how that financing gap is filled,” Kaplan said. “We don’t have a tear sheet, we are happy to finance mezzanine debt, preferred equity, equity or a combination of all of the above. We are looking at whatever our attachment point is and pricing it accordingly. We would like to be a constructive partner to the borrower.”  

Like its peers, Meadow Partners experienced transaction activity that almost completely halt in mid-2022. “It was a combination of market activity slowing with fewer properties trading and less financing and our firm being more concerned and cautious about what was going on,” Kaplan said.   

And while the tone of the market feels anecdotally better, transaction activity has still not yet picked up. What has been interesting, however, is that the firm is starting to get inbound calls from senior lenders directly about potential opportunities.   

“Our pipeline is large and we are looking at a lot of deals, many of which have a longer incubation period, but we are operating at a lower hit ratio than normal,” Kaplan said. “It is our feeling that pricing is moving in our direction, specifically on rescue capital deals. Despite borrowers saying, ‘I don’t want to pay that,’ we are starting to see them getting comfortable with where pricing is.”