In the current economic climate, characterized by elevated interest rates, unfavorable underwriting, or property value depreciation, and the owners don’t want to sell for loss, rescue capital may be the next viable option.

Multifamily real estate syndications are encountering significant challenges, particularly when approaching refinancing milestones. Many of these syndications, having initially secured financing under more favorable terms, now face the prospect of refinancing at higher rates, which can jeopardize their financial stability.

Locating Distressed Properties

Rescue capital typically enters the capital stack as a type of gap financing in the form of preferred equity or mezzanine debt, offering a lifeline to distressed properties. This infusion of capital often requires original sponsors to concede a portion of their equity position or grant the rescue capital provider a preferred return. While this dilutes the original stakeholders' share, it is often a preferable alternative to foreclosure or significant financial loss. Wilkinson’s network of relationships, spanning over three decades, are one source of rescue capital opportunities. The structure of these deals ensures that Wilkinson investors receive priority in cash flows, enhancing the security of their investment. 

As interest rates remain elevated, the role of rescue capital becomes increasingly pivotal in the multifamily real estate sector. It not only aids in stabilizing distressed assets but also offers investors the prospect of substantial returns. Both sponsors and investors must carefully navigate these arrangements, balancing thorough due diligence in the deal, with financial need, with immediate long-term strategic objectives to ensure mutually beneficial outcomes.

Current Opportunity

Houston Triple Play Properties