Taurus Investment Holdings is looking to make moves in the rescue capital and preferred equity space with chief executive Peter Merrigan describing the opportunity as a “short-term phenomenon.”
“We anticipate there will be two to three years of opportunity where there is this gap in funding in the capital stack that we can play in,” Merrigan told Real Estate Capital USA. “Eventually the margins will get squeezed, but for right now, it’s a pretty attractive place to play.”
The Boston-based manager looks to focus on this area of the market through its Taurus Capital Solutions platform.
“We see some pretty attractive returns in the private credit space, commensurate with what our historic common equity return would have been,” said Merrigan.
The firm is currently working on a preferred equity deal in the northeast for an industrial acquisition in the $50 million range.
“There are a lot of people saying [this type of financing] is a fairly obvious opportunity but it’s a big market, there’s plenty of room for multiple players,” added Merrigan.
The focus comes as the markets reset and adjust to higher interest rates and volatile lending markets. The Federal Reserve raised interest rates by 25 basis points at a meeting on July 26, setting the target range in a level of 5.25-5.5 percent – the highest level since 2001.
Looking at other market characteristics, Merrigan has a few predictions. “The yield curve will remain inverted in the near-term; economic growth is going to slow down significantly while inflation will gravitate back down towards the target, causing the eventual need for stimulus and a restoration of the normal curve,” he said.
Despite commercial real estate market turbulence, Taurus is on track to reach $1 billion of acquisitions in 2023, with 10 deals in the pipeline to close by the end of the year.
The firm is currently working on an acquisition financing for an industrial deal of around $120 million.
“The loan itself will be around $80 million, and that’ll be closing early August,” said Merrigan, highlighting it is the bigger loans that are harder to get done.
“It’s about asset management; it’s about having the right capital relationships; it’s about protecting your existing assets while creatively finding new lines of opportunity,” he said. “And they’re out there, we’re definitely continuing to do new business on both the development side and preferred equity types of deals, rescue deals and new acquisitions.”