ABK Capital is a leading real estate debt financing and advisory company based in Miami, Florida. The ABK Capital Group supports real estate agencies and their investors in raising capital and developing effective financial and business strategies in both up- and down-market cycles in South Florida.
Working with a range of lending and financing institutions, the company makes sure that its clients achieve adequate funding irrespective of the client profile and the nature of the projects they are involved in.
The company understands that creative financing solutions are critical to the long-term success of various corporate real estate (CRE) investments, including property acquisitions, operations, and improvements; high-value mergers and acquisitions; new construction and developments; etc.
The brainchild of Alex Kleyner and Brian Hernandez, two highly qualified real estate professionals with deep experience in the Florida REIB (real estate investment banking) sector and possessing extensive knowledge of the real estate market in general, ABK boasts of deep knowledge and expertise across a wide range of property types and markets all over South Florida.
Since its inception in 2014, the company has been involved in different capacities in a large number of real estate projects in the Miami metropolitan area (that includes the City of Miami, and Palm Beach, Broward, and Miami-Dade counties—the three most populous counties in Florida) and elsewhere in South Florida, including Fort Lauderdale, Boynton Beach, Pompano Beach, Delray Beach, Sunset Isles, Hollywood, Islamorada, and many others. Currently, the company’s clients range from lenders, developers, and private equity funds to REITs to HNIs and family-owned businesses.
In addition to its capital raising endeavors (the primary area of operation of the company), ABK’s advisory team works with clients to help them successfully capitalize property investments, guiding them through all the critical steps required for the same and assisting them with processes such as restructuring and refinancing existing debt.
According to the founder and CEO Alex Kleyner, the ABK core team is made up of industry experts who possess an excellent understanding of real estate finance, investment strategy, and tax and accounting implications of alternative debt/financing solutions.
Through detailed research and analysis carried out for each individual project, the company is able to come up with effective strategies (including tax-efficient debt strategies for alternative financing) that ensure supportable cash flow for the project in question.
The holistic, end-to-end solutions offered by Alex Kleyner ABK Capital means that from planning to closing, the company will work alongside the client through each and every stage of the process, with the goal to realize sustainable results. ABK will help with securing seed capital for projects; CRE business planning & operations; cash flow modeling; drafting strategies for internal controls and cost reduction; restructuring, refinancing, and bankruptcy; and real estate tax planning, among other things.
South Florida Real Estate Market
Real estate in South Florida has bounced back strongly after the pandemic-induced heavy slump experienced during the first quarter of 2020. The Miami real estate market, especially in the housing, office, retail, and hospitality sectors, is pretty strong right now.
Many believe that the market is in a state of a vigorous resurgence as demand has been steadily increasing since July last year. Low mortgage rates and pent-up demand mean that these sectors continue to break records. For example, according to the MLS (Multiple Listing Service) systems and the Miami Association of Realtors, the housing market in Miami-Dade County has set a record in terms of total home sales (single- and multi-family homes and condos combined) in the 2nd quarter of 2021.
This means there is an enormous demand for a cash infusion in South Florida real estate right now, especially for development and acquisition projects. And many industry experts believe that the current rich growth potentials will be stymied if this huge demand for capital is not met adequately and met soon enough.
The problem lies in the fact that many lending institutions have seen considerable deplete in financial strength due to the halt in economic activities during this long stretch of COVID-19. As such, many are no longer able to fulfill pledges made before the pandemic. In addition, there are companies that have altogether stopped operating in certain sectors of the market. All these have put a good many developers, realtors, and investors in Miami and South Florida real estate in a spot of bother as they are having a hard time securing capital for their planned projects.
ABK Capital Creative Financing Solutions
Innovative and resourceful CRE debt financing solutions offered by leading REIB companies like ABK Capital prove to be all the more valuable in the face of the difficult and complicated circumstances mentioned above. Kleyner remarks that although times are difficult, his company still possesses enough resources in the form of its access to various lending institutions.
As such, no matter the nature of the project, ABK can handle the task of securing capital through various means that include, in addition to conventional debt financing or senior loans, joint venture, structured debt finance, preferred and common equity, mezzanine debt, bridge financing, and hard money loans.
According to Alex, ABK not only ensures that its clients achieve adequate funding but also that they gain access to funds in the best terms available, be it through commercial banks, private investment banks, insurance companies, pension or opportunity funds, or private equity investors.
Understanding CRE Debt Financing
Conventional debt financing in the form of senior secured loans (either from a government agency or a private bank) is, of course, the most straightforward and cost-effective option for raising capital for one’s real estate investment. One applies to a traditional lender and secures a mortgage once the lender in question has performed careful vetting of a loan’s collateral and the applicant’s financial history.
However, terms around senior loans have become extremely stringent and prohibitive ever since the financial crisis of 2008, meaning that companies lacking in financial clout stand little chance of getting qualified for senior loans. Apart from that, the document chase performed by traditional lenders often takes a good while to complete.
This means stunted cash flow for companies with rich growth potential and who need funds quickly in order to realize their expansion plans and thus make good of the potential. Kleyner from ABK Capital maintains that in such scenarios, trading in equity interests (whether in the company itself or in an investment property) is a fast and convenient way to leverage capital for companies with proven track records.
Then, there are junior or second-tier options such as preferred equity, mezzanine loans, and bridge financing that combine equity and debt financing and offer developers, realtors, investors, etc. different and additional options for securing capital and for repayment.
A hybrid of equity and debt, mezzanine financing (also called mezz debts or mezz loans) sits on top of a senior secured loan in a capital stack. This type of financing carries attractive features for both the borrower and the lender.
To begin with, all interests paid on mezzanine loans are tax-deductible. Borrowers also enjoy more control regarding the scheduling of repayment and interests. For example, a typical mezzanine loan gives the borrower the opportunity to choose among monthly, quarterly, or annual payments of interests. Finally, if the borrower manages to expand his capital, he can restructure the mezzanine debt into a senior-level loan with lower interest rates.
As regards the lender, he is entitled to receive equity in the investment property in case of a default. In certain circumstances, mezzanine lenders will also receive warrants for buying an equity stake in the company.
Preferred Equity Financing
Preferred equity is in many ways similar to mezzanine financing, the principal difference being preferred equity is a direct investment in the business itself (unlike mezzanine loan, where the lender typically receives an equity stake in the property in case of default). In a capital stack, preferred equity sits on top of mezz debts but below common equity, and like a mezz loan, it is a form of hybrid debt instrument meant primarily as a supplement to the senior debt.
Debt Bridge Financing
Also known as bridge loans, debt bridge financing comes in various forms (including hard money loans), and terms will vary according to the lending source. Typically, they are meant as an interim solution until the borrower can secure additional capital either through a traditional loan instrument or via hybrid ones, such as mezzanine or preferred equity financing. The tenures can vary from 1-3 weeks (for short-term bridge loans) to six months (commonly for bridge loans obtained through venture capital firms).
Capital Stacking and ABK Capital
Capital stacking refers to the method of organization of all capital assembled to finance a real estate project. For an investor, it is the structure of the stack, and his place within that structure is what determines when and how he will get paid and whether or not he holds any right to take management of the investment property.
As most will know, any and all secure debts act as the foundation of all capital stacks, whereas common equity investments sit at the very top of the stack. And in between is the place for any and all types of hybrid loans sourced to secure the requisite capital for the project. So, for example, mezzanine financing sits right on top of senior debt while preferred equity sits atop all mezz loans.
Now, according to Mr. Kleyner, proper stacking of all contributed capital is paramount when it comes to securing seed capital for a CRE project. In other words, any CRE funding solutions provider service must possess a thorough knowledge of different capital stacking methods and what sort of organization to apply for any particular real estate project so as to provide optimal value or reward for the latter.
Therefore, as Mr. Kleyner insists, it is simply not enough to be able to source capital for a project, but one must also use the right lending sources (depending on the nature of the project) and should be able to provide his client with proper guidance as to what types of financing to use for what percentages of their total requisite capital.
For example, if one must use a bridge loan for his project, should he opt for a short-term loan or one that comes with a longer tenure? Should one borrow the bridge capital from a traditional lender, a venture capital firm, or through microfinance sources? Again, if one cannot secure a senior loan, how much of the capital should be borrowed through mezz loans (and from what lending institutions), and how much of it should be secured through preferred and common equity?
All these come into the equation when it’s a question of offering the best terms possible for a client about to undertake a real estate project. And apart from ABK Capital’s access to and deep relationships with various lending institutions, it is the integrated research, renowned property insight, and excellent financing expertise of the ABK team that helps their clients achieve maximum value, gain access to opportunities that other companies may overlook and avoid mistakes that can prove costly in the end.
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