Eastern Capital LLC is now a major investor in Yorba Linda. The Atlanta based private equity firm invested $1.55 million in phase one of a new office building going up in the California town. In a country where the major banks are still reluctant to lend money, private equity firms such as Eastern Capital have stepped into the void, offering the kind of large loans that commercial real estate ventures need to proceed on course.
In related news, the city of San Jose’s police and fire fighter retirement fund is considering investing some of its capital in commercial real estate debt, something they had never done before. And retailers such as Costco and Wal-Mart now offer mortgages and other banking related services.
As these stories suggest, the entry of private equity firms — essentially large investment organizations that pool money from a number of investors to pour into the commercial real estate market — is a fairly recent phenomenon. Regulators are concerned that these private equity companies do not have the same checks and balances that ordinary banks have. However, this new form of banking may be the wave of the future since banks continue to be wary of investing large sums of money on sometimes-risky commercial real estate ventures.
If your private equity firm is considering getting involved in the commercial real estate loan business, it is vital that you work with a skilled attorney who understands the complexities of the market. An attorney can help your firm succeed in organizing the loans to offer your company the maximum protection available, especially when you consider the risk of such large investments.