Real Estate-Finance & Investment
With More In The Wings by Tova Gerson
T-Rex Capital is gearing up to launch its first investment fund. The New York-based company decided to kick off the $250 million fund to tap into the growing number of investment opportunities, according to Thomas Mulroy, Ceo. “We feel the raising of the money will coincide with where the market is slowing, “he said, adding that a number of institutions are trimming their balance sheets. The T-Rex Capital Fund I will make acquisitions and provide equity and debt financing to private real estate companies. This also will be the company’s first foray into mezzanine transactions, a move aided by Mulroy’s experience at Lazard Freres, where he was a Senior V.P. and active in similar deals.
The fund will likely be most active in residential and office deals in high-profile markets. A small portion will be earmarked for hotel and retail deals, Mulroy said. The company is eyeing transactions in New York, Boston, Los Angeles, San Francisco and parts of Florida and Washington. The fund will make investments of a least $10-20 million. The company expects to launch a series of follow-up funds. “Depending on how this goes, “he added.
The fund is targeting overall returns in the 20% range, with a hurdle rate of about 10-20%, Mulroy said, adding that it has not been finalized. It will use leverage of about 65-70%. The company has about $300 million of acquisitions in the pipeline which it is eyeing for both the fund and for its own behalf. T-Rex has completed $600 million in real estate transactions outside of the fund over the past 18 months.
The fund, which is being marketed to pension funds, high-net-worth individuals and institutional investors, requires a minimum investment of $5-10 million. The company expects to close the first phase of the fund by the first quarter of 2002, with about $100 million of equity raised. It has already received some seed capital, he said, declining to elaborate.
The company is interviewing a number of investment banks to help raise capital, Mulroy said. Its choice is dependent on the bank’s access to pension funds and other sources of institutional capital, he said, adding that it expects to make its selection with 60 days. Fees will be in line with market standards, at around 1-1/2% on equity committed. T-Rex will not be making any additional hires and will tap into its 30 member staff to handle the real effort. The company’s cfo, Kevin Reardon, will manage the fund.
T-Rex spun off from its parent company, Terremark Worldwide, in January, to tap into non-telecommunications related real estate transactions. T-Rex regained the 50% of the company it didn’t already own by handing over 1.4 million shares of Terremark. T-Rex was formed as a subsidiary of the company in May 2000 and still retains 6.6 million shares in Terremark, The company retained ownership of several assets as a result of the transaction, Mulroy added.