The Icing On Its Cake: Emerald Creek Pleased With Equity Fund Launch In Record-Breaking Year Of Lending

While many in the commercial real estate industry are putting their projects on pause in light of market uncertainty, others have found that it can pay to be patient while also playing to their strengths.

That is the approach of Emerald Creek Capital, a New York-based CRE investment firm. Like everyone else, the firm is waiting to see how the market will look in a year or two — but that doesn't mean Emerald Creek is hunkered down in wait-and-see mode. 

In fact, it is experiencing one of its strongest years in its 13-year history and is on pace to fund more than $500M in commercial mortgages this year. 

Emerald Creek’s strong performance is thanks in part to the early success of the ECC Opportunity Fund, an equity investment fund it launched in late 2021 to pursue property acquisitions and joint venture partnerships. Its focus areas are multifamily, industrial and self-storage in the lower-middle market, where it teams with regional partners to implement value-add, lease-up and repositioning strategies for acquired properties. 

“We launched ECCOF because we knew there was a void in the small to middle market,” Emerald Creek co-founder and Managing Partner Mark Penna said. “Much like our debt business, institutional capital tends to focus on larger deals of $50M or $100M-plus. We believe there are better margins and higher risk-adjusted opportunities in the $5M to $25M deal space.”

Managing Director Tom Hollins, who, along with Christian Galanti, is co-manager of ECCOF, said the new fund already has acquired more than $200M in commercial properties. He said ECCOF is very selective in its choice of deals, targeting industrial and multifamily properties in the Southeast and Southwest that it judges as relatively insulated from economic distress.

One example is a single-tenant, climate-controlled industrial facility outside of Jacksonville, Florida, which the fund acquired in partnership with a vertically integrated operator. 

Thanks to the supply-demand dynamics in the area’s industrial market and the 247K SF building’s below-market in-place rent, ECCOF was able to sell the Class-A warehouse for $21.85M and generate an “excellent return for investors,” Hollins said.

Emerald Creek has similarly high hopes for an industrial portfolio it recently acquired near Miami, he said. While the buildings on the 140K SF property were only 30% occupied at closing, the firm pursued a “significant” capital improvement plan that already has brought occupancy to more than 80%.

“This deal is a good example of ECCOF acquiring industrial assets in a very strong market and doing the challenging CapEx work to improve the quality of the assets, resulting in robust tenant leasing demand,” Hollins said.

Thanks to the efforts of ECCOF and Emerald Creek’s other team members, Penna said 2022 has been a strong year for the firm, in spite of the market’s ongoing uncertainties.

“Our clients are global investors with diverse portfolios, and they appreciate Emerald Creek’s disciplined and conservative approach to deploying capital,” Penna said. “By leveraging the thousands of relationships that we have built, we can identify off-market deals that the average investor or family office would not.”  

Galanti and Hollins came to the firm last year from Paragon Outcomes Management, a $1B-plus private real estate investment firm. In their eight years with POM, Galanti and Hollins built the firm's real estate platform, successfully executing more than $1B in CRE transactions, including $500M of joint venture and preferred equity transactions. 

While it is still early days for ECCOF, they said they are confident they can be similarly successful at Emerald Creek.

“The fund is well-positioned with high-quality assets and the capital to take advantage of future opportunities that come about from the current market dislocation,” Galanti said. 

Hollins said Emerald Creek will continue to seek investment properties for its equity investment fund that present value-add opportunities where it can apply its “hands-on approach” to asset management.

“Given the uncertainty in the market, we are focused on maintaining our investment discipline in our target sectors and geographies within the lower-middle market," Hollins said. "We are seeing a lot of continuing opportunities in our $5M to $15M equity check sweet spot, where there are certainly fewer competitors.”

Galanti agreed, noting that even if the CRE world is struggling to make sense of a "different environment from what investors had grown accustomed to," Emerald Creek is ready to continue to grow "when the dust settles."

"With ECCOF, we are well-positioned to take advantage of new opportunities going forward," he said. 

This article was produced in collaboration between Studio B and Emerald Creek Capital. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to [email protected].