Mergermarket: Graceada Partners raising USD 100m to capitalize on coronavirus-era low real estate pricing - exec
Graceada Partners, a Modesto, California-based commercial real estate investment manager, plans to quadruple the size of one of its funds after the coronavirus pandemic creates opportunities to buy cheap assets, said Joe Muratore, partner and co-founder.
Graceada wants to raise about USD 100m for its second fund in the next 12 months, Muratore said. Muratore confirmed that Graceada Partners Fund II was originally seeking USD 25m in an equity offering, and it had raised USD 10m as of February 2020.
During the market turbulence, Graceada is focused on assets with long-term leases and in quality neighborhoods, Muratore said, adding that banks and credit unions are more willing to lend on these stable assets.
Specifically, Graceada plans to buy a 150-unit multifamily complex and a government occupied office building worth USD 40m, with 68% debt and 32% cash, he said. “We're able to buy them for a few million dollars cheaper than we would have just a few months ago, mainly because there's very little competition right now,” he said.
On the other side of the coin, Graceada doesn’t plan to sell any property before next spring because appraisals are challenging, Muratore said.
Graceada owns about USD 100m worth of commercial real estate property in California’s Central Valley through eight syndications and the two real estate funds, and it manages about USD 350m worth of third-party property assets in the area, Muratore said.
Graceada typically invests in office buildings, shopping centers, and multifamily apartments worth USD 10m-USD 30m within a 1.5-hour drive from its Modesto office, Muratore said. The firm collected about USD 18m in rent in 2019 and expects to see as much as a 10% increase in rent collection in 2020 as the firm plans to continue investing, he said.
The firm’s portfolio has a loan to value ratio of 52% and has achieved an internal rate of return (IRR) of 15% to 25% on a three to seven-year holding period, Muratore said.
Muratore said he expects to see 15% to 20% less demand for overall office space coming out of the coronavirus crisis, but the Central Valley area, inland from San Francisco Bay, may see an economic boost from tech workers who no longer need to work in their Silicon Valley offices. That, in turn, may mean more demand for multifamily apartments and service offices for doctors, chiropractors, and retail stores, he added.
Graceada competes with Basin Street Properties and Ethan Conrad Properties, he said.
Muratore and his partner Ryan Swehla, co-founded Graceada in 2008 and each owns half of the firm. Graceada has 12 employees, Muratore said.
It works with Pircher Nichols & Meeks for legal counsel.
by Xinyi Jiang in Charlottesville, Virginia