John B. Levy & Co. is used to helping raise debt and equity for real estate transactions and sometimes making acquisitions itself. Now, with its latest assignment, the firm has a slightly different role when it comes to financing transactions.
The Innsbrook-based company announced it was recently appointed administrator of a $50 million pool of external capital that will be deployed entirely in commercial real estate transactions.
The company said the eight-figure allocation came from an unnamed “Fortune 500 insurance company” with which JBLco has signed a number of deals over the past few years.
The firm's president, John Levy, said it was the first time the firm, which describes itself as a commercial real estate investment bank, had done a deal structured like this.
“Typically, when someone comes to us with a deal, we look through our investment roster to see who can execute on it,” Levy said. “They've done it the other way around.”
Levy said the work began with an anonymous backer asking how they could help scale their business, which led to the new format.
“We've invested with them many times before, and they liked what we were doing,” Levy said. “I said, 'Why don't we expand on what JBLco is doing for you?'”
With the funds in hand, Levy said the company is now looking for deals and is considering deploying the capital immediately, with the goal of spreading it out across multiple deals.
“The green light has come on, so to speak,” Levy said.
The funds are used as equity or intermediate debt, rather than as funding for first mortgages on real estate. They aim to be a source of funding for the purchase of existing properties, property renovations, and bridge financing for specific projects.
We are flexible, within limitations, when it comes to property type and location.
“We're not picky about the type of property, but we really want housing, affordable workforce, flex and small industrial, regular industrial and retail,” Levy said.
They will focus on real estate in the Mid-Atlantic region and the Southeast, including Richmond, the Baltimore/Washington, DC area, Hampton Roads, Charlotte and Raleigh.
Levy said that after raising the funds, the company plans to close each deal within three to seven years, with the potential to replenish the $50 million in future rounds.
As a counterparty to the contract, Levy & Company collects a fee and bears its own risk on each transaction.
As part of the deal, Levy said he and his partners agreed to put up $50 million plus some of their own capital for the investment, a move the firm has made in the past in similar “at-risk” co-investments in deals it has helped raise.
“Part of the agreement is that we will invest alongside them,” Levy said. “It's our partners' money, so the amount will be meaningful.”
Acting as a custodian of the funds is the latest example of Levy & Co. expanding beyond its traditional role as a fundraising intermediary.
The firm partnered with a Maryland-based company in 2020 to bet on a pandemic-era suburban office-park deal, and profited from that deal in 2022, albeit sooner than expected.
The company also independently acquired an apartment complex in Richmond in 2022, initially with the intention of converting it into condominiums. The plan later changed to a buy-and-hold strategy.
As he launches his $50 million investment, Levy acknowledges that now isn't the easiest time to find deals.
“The market is volatile right now,” he said, adding that commercial real estate transactions in the Richmond market, for example, were down more than 60 percent last year.
But he is confident the bulk of the money will be paid by the end of the year or early next year, and said he has already been in discussions with property owners since rumours of the capital funding began circulating earlier this month.