Debt capital markets advisor, Diversified Lending Solutions (“DLS”), is expanding its focus from arranging debt on commercial real estate transactions to helping emerging managers, particularly minority and women-led companies, secure programmatic equity from institutional investors.
Co-Founder Vernon Beckford explained the rationale. “The pattern we observed was that even when our clients are thrilled with our loan execution, their elation quickly shifts to concern around raising enough equity to purchase larger transactions downstream. Our clients rely heavily on friends and family capital, so there comes a point where you exhaust that resource and need to diversify into more institutional channels. We want to help make that transition as smooth as possible.”
Growing real estate operators of every stripe often struggle to attract institutional capital, either because of their limited track records, target markets, or focus on smaller transaction sizes. But struggles are often compounded for members of under-represented groups, like minorities and women led companies. While several large funds have made meaningful commitments to fund such companies in recent years, deploying capital still proves very challenging.”
It’s encouraging to see more funds prioritizing emerging managers, but for these vehicles to be successful they will need to build and sustain healthy deal pipelines,” says co-founder, Eric Andrew. “Our job is to remove the friction from that process, by demonstrating just how deep the bench is of highly experienced, and qualified operators.”
Both Mr. Beckford and Mr. Andrew understand what goes into making a real estate operator “institutionally investable.” Prior to launching DLS, both served stints at large investment firms, including insurer Global Atlantic (now KKR owned), Credit Suisse, and Cap Trust focusing on debt and equity real estate investments.
As a result, DLS’ advisory services go beyond simply introducing diverse sponsors to prospective institutional investors. Their goal of democratizing access to capital for emerging managers calls for a more holistic and hands-on consultative approach.
“Before we introduce a sponsor to a fund, we need to make sure the proper groundwork for success has been set,” said Mr. Beckford. “Do they have the funds on hand to put down a large earnest money deposit, if needed? If not, we can arrange that. Do they have key principals willing and able to sign onto the recourse requirements for larger loans? If not, we can bring them to the table. Have they thought through whether they have the internal personnel to absorb 2-3x their existing unit count? If not, we collaborate to establish a growth plan. We essentially become an additional member of the operating team, which has proven a really powerful means of helping lean organizations build the infrastructure necessary accelerate their growth.”
DLS currently maintains strategic relationships with about a dozen funds and anticipates a gradual increase over the course of the year. “While we will look to broaden our base of partners, we are being very deliberate about the funds we work with to really understand their credit box, ideal sponsor characteristics, and deal parameters. Fortunately, there is no shortage of qualified operators to talk about. “
Diversified Lending Solutions is a capital markets advisory firm that arranges residential and commercial real estate loans for professional investors. The company focuses on projects requiring $1million of debt capital and above. For more information, please visit http://www.dlsloans.com/
If you are a minority or women led operator or institutional investor interested in learning more, contact DLS below.