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Base Preferred Equity Fund I

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Base Preferred Equity Fund I was borne out of the need to provide liquidity to an underserved segment of the real estate market, providing a tremendous opportunity for investors to achieve equity level returns whilst being in the lower risk preferred equity position.
 
The Fund’s projected return to investors is a 14% or greater net return, generated from in-place cash flows, up-front payment reserves (if necessary) and value appreciation realized after the implementation of an approved value-add program.
 
Base Preferred Equity Fund I will focus on the origination of small-balance ($1-5M) preferred equity investments with established sponsors in value-add real estate in growth markets throughout the U.S.
 
The risk adjusted return is attractive for several reasons: (1) lack of equity providers in this deal size range, (2) increased deal flow and demand following the pandemic and (3) each investment’s protections in the lowest equity loss position, which insulates the Fund from typical equity losses.
 
Base Equities partners with best-in-class local sponsors in high growth markets to provide the equity needed for acquisition and implementation of an approved value-add program. Most preferred equity providers are focused on larger check sizes, leaving the $1-5M preferred equity market bereft of capital providers.
 
By taking a preferred equity position, the fund is paid directly after the lender and before the deal Sponsor, greatly reducing the risk. Here is a visual representation showing the insulation from loss. In this scenario, the purchase price for the property plus the renovation cost is $16.5M, consisting of:

  • – $12M first mortgage
  • – $2.5M preferred equity
  • – $2M subordinate common equity (sponsor equity)

The expected profit is $3.5M for a total stabilized value of $20M. This means that there is $5.5M ahead of the Fund’s investment, insulating it from potential losses. img

All Fund investments are structured with provisions to allow Base Equities to step into the equity position if the value of the property is impaired from either operations, material market movement, or a breach of the investment agreement by the Sponsor. Breaches include failure to pay timely, material deviation from the approved business plan and typical bad boy carve-outs.
 
Base Equities’ principals have successfully closed several preferred equity transactions since December 2020 and have built a pipeline of potential future transactions through their deep network of mortgage bankers, listing brokers, lending institutions and existing sponsor relationships.
 
The Fund offers investors: (1) current cash flow paid from operations, reserves and value appreciation, (2) a preferred return and (3) equity redemptions that get paid before all other equity investors.

Strategy:

Value-add preferred equity

Product Type:

75% minimum multifamily

Target Fund Size:

$50,000,000     $50,000 minimum investment

Hold Time:

5-7 years

Projected returns:

14% net IRR

Base Preferred Equity Fund is a 506(c) offering for Accredited Investors only.
 
Schedule a 15 minute call to discuss investing in Base Preferred Equity Fund I.