Investment Overview
In November of 2012, Croatan Investments closed on the preferred equity investment in Blackwolf Run, a townhome rental community located in Raleigh, NC. A Class B physical asset, Blackwolf Run was originally built between 1998 and 2000. These individually platted duplexes were located in a Class B neighborhood setting only minutes outside of downtown Raleigh.
Challenges
As the financial markets were still recovering post-Global Financial Crisis, the common equity sponsor was difficult to finance due to limited liquidity from heavy exposure to land development and homebuilding. Croatan was able to identify Blackwolf Run as the sponsor’s best collateral and provided a preferred equity solution at 80% loan-to-value.
Outcome
▪ In October of 2016, three years prior to maturity, the sponsor paid off Croatan’s preferred equity position. This investment generated a gross IRR of 16.09% and gross equity multiple of 1.69x on a 4-year hold.
▪ Given the pre-existing relationship, in October of 2021, the owner engaged Croatan to purchase the asset direct off-market at a discount, along with the addition of 122 units not previously collateralized as part of our preferred equity position. Croatan closed on the investment with a joint venture partner, who provided 95% of the equity.
