Atlas Real Estate launches small-balance lending platform

The $1.8 billion New York-based real estate investment firm’s lending platform, A4 Capital Partners, is also targeting a $150 million fund to originate a diversified portfolio of loans. The loans will predominantly be under $4 million.

The A4CP lending platform will target underserved borrowers in high-demand East Coast and select Sun Belt markets. The hope is that the vehicle addresses the critical gap left by traditional lenders, offering short-term asset-backed loans, Nick Marcello, managing partner told PERE Credit.

“The small balance lending environment has been pretty decentralized,” Marcello explained. “[There’s] a mismatch of some banks that will occasionally do deals in this space, but banks don’t like the short-term nature of [this type of lending] and how quickly you typically need to move.”

Marcello, who will lead the new lending platform along with Alex Foster, Arvind Chary and Ben Weber, said the platform comes at a time of increasing institutionalization in the space. “[We’re] left with two dynamics – the smaller brokers and lenders, and then the larger more bank-like lenders. There’s a hole where we can provide a good boutique borrower experience, with more of a polished institutional footprint.”

Strategy breakdown

A4CP is a balance sheet lender, which Marcello says enables faster, in-house loan approvals. Additionally, the lender will offer conservative leverage and seek personal alignment of interests through significant co-investment. The firm will tap into existing relationships with borrowers and brokers to secure off-market opportunities primarily in the residential sector.

“Having healthy debt capital being provided to builders and investors is ultimately going to drive more supply into the market, but there’s a pretty massive housing shortage across the US which has been systemic since the GFC,” he said.

The platform will provide capital to be able to both build new homes as well as renovate existing ones. It sources its loans through three avenues: existing direct relationships, brokers and SEO marketing platforms.

“The housing shortage issue is not just about needing rehabbing, particularly in our primary footprint [in the] Northeast where you’ve got one of the oldest housing stocks in the US; it’s one of the more mature real estate markets. We are filling a critical void there for both building new stock, but also renovating existing properties to make sure there’s no obsolescence,” Marcello said.