Westwood-based Base Equities, an investment company focusing on preferred equity in commercial real estate assets, has formed a joint venture partnership with Maryland-based Alex Brown Realty.
The company’s ABR Chesapeake Fund VI is giving $26 million to Base Equities.
Base Equities was founded in 2021 and is led by principals Michael Bastan and Eli Moghavem.
The company focuses on small-balance preferred equity investments ranging from $1 million to $5 million. The money is invested in commercial real estate, focusing on value-add multifamily transactions that range from $5 million to $30 million.
“The Base Equities team has identified an underserved need for reliable equity partners providing preferred equity investments of $1 million to $5 million,” Tom Burton, senior managing director and chief investment officer of ABR, said in a statement. “Based on this forward-thinking strategy and well-aligned values and experience, including target assets in several overlapping growth markets, we believe this partnership is an ideal fit.”
Base Equities’ Base Preferred Equity Fund I is continuing to raise money with the goal of raising $50 million.
“We started this platform that is focused on small-balance preferred equity only,” Moghavem said. “We think the $1million to $5 million space is really underserved. We found a niche in the market where demand really outpaces supply.”
He added that there was a “huge demand” for companies like theirs. Moghavem said the money they provide is also cheaper and provides more flexibility than other funding sources, making it desirable.
“We are an alternative to traditional syndication methods,” Moghavem said.
Bastan added that the company is really focused on who they will be giving money to and not just the deal.
“With the larger deals, there’s more of a focus on the deal itself as well as on the sponsors, but when you’re in the small-balance space, there’s an extra emphasis on really understanding and underwriting the sponsor and their experience and their strategy,” Bastan said. “That’s one thing which is more specific or different when you’re dealing with small-balance assets.”
The money from ABR, Moghavem said, would allow the company to continue to “act quickly on the deals that we like.”
He said ABR brings a lot of experience to the table and has “an attractive track record as far as investor returns.”
“The partnership will allow us to scale. It’s been a real endorsement of our strategy to know that a veteran in this space that has been around for over 50 years was so eager to get involved with us,” Moghavem said.
And looking forward, the company plans to grow, adding more employees and continuing to raise money.
“We’re pretty confident from what we’ve seen from the sponsor and brokerage communities that there’s a huge demand for this,” Moghavem said. “We know that we’ll be able to deploy this capital pretty quickly.” Bastan echoed those sentiments.
“The opportunity is in small-balance, whether it’s successor funds, which we definitely expect, or maybe other areas within the small-balance field, that’s our focus,” Bastan added. “ We see a lot of demand coming in and expect to scale up pretty fast, pretty soon.”
