PGIM, Citymark Team Up To Spend $500M Buying Multifamily Loans
PGIM has its eye on multifamily debt acquisition, and now it has the force of a $500M joint venture behind that strategy.
Prudential's real estate arm is partnering up with Citymark to snap up performing and nonperforming multifamily loans. PGIM manages about 600,000 multifamily units in the U.S.
More than $650B of multifamily debt is set to mature by 2026. The JV wants to fill the hole in financing left by other lenders, like banks wanting to minimize their commercial real estate exposure due to high interest rates. Banks and thrifts made up 30% of total outstanding multifamily debt in the first quarter with $620B, the Mortgage Bankers Association found.
That doesn't mean it is banking on deep distress.
"We don’t foresee massive discounts of loan sales," Citymark CEO Daniel Walsh told Bloomberg. "It’s really more of a little bit of capital that’s needed from all parties just to get through to a better interest rate environment, say the next 18 to 24 months."
PGIM and Citymark are betting on sustained demand in the rental market, as aspiring homeowners remain burdened by high costs. The number of renters has risen three times as fast as homeowners in the past year, Redfin found.
Multifamily investment is picking up as companies in the sector are ready to buy. With higher borrowing costs, property values have fallen, according to CBRE, creating a market that favors investors focused on long-term strategy.
ECI Group is one company that has been moving various chess pieces across the board to lock down a large portfolio of multifamily properties and loans. The company secured a $350M infusion of capital from Almanac and is targeting $3B in investment in the multifamily market over the next three to five years, the company announced Monday. The investment will go toward credit investments, acquisitions and developments.
ECI wants to acquire existing and in-progress multifamily communities across Texas and the Southeast, then expand nationally as the strategy progresses. The Sun Belt region was chosen because the company sees an opportunity to invest in markets with shortages of market-rate apartments, ECI CEO Seth Greenberg said in a press release.
Last week, ECI, InterVest and Smith Hill Capital launched a $250M multifamily private lending platform. The venture will provide mezzanine financing and first mortgages, as well as providing preferred equity multifamily investments on new builds, acquisitions and refinances. The target loan amount is between $15M and $100M.
Atlanta-based ECI's portfolio stands at 7,600 units in 28 properties across the Sun Belt.
