The team at John B. Levy & Co., including John Levy standing third from the right.
John B. Levy & Co. is accustomed to helping line up debt and equity for real estate deals and occasionally making its own acquisitions. Now, in its latest engagement, it’s taken on a slightly different role as it relates to funding deals.
The Innsbrook-based company said it was recently tapped to be the steward of a $50 million pool of outside capital that’s to be put entirely into commercial real estate transactions.
The eight-figure allocation comes from an unidentified “Fortune 500 insurance company, with whom JBLco has closed on numerous transactions in the past few years,” the company said.
John Levy, the firm’s president, said it’s the first time his namesake company, which describes itself as a commercial real estate investment bank, has done a deal of this structure.
“Normally we would have someone come in with a deal and we’d go out and look in our investment rolodex as to who might do it,” Levy said. “These guys kind of reversed it.”
Levy said the work came about when the unnamed backer inquired how they could do more business together and they struck on this new format.
“We had invested with them on a number of occasions. They liked what we did,” Levy said. “I said, ‘Why don’t we just expand what JBLco is doing for you.’”
With the money in hand, Levy said the firm is now on the hunt for deals. It’s looking to deploy the cash immediately with a goal of spreading it across several deals.
“As we would say, the green light is on,” Levy said.
The capital will be used as equity or mezzanine debt, rather than for funding a first mortgage on property. They’re looking to be a source of capital to purchase existing properties, to fund property rehabs and as a bridge loan for certain projects.
They’re flexible on property type and location, within limits.
“We are property type agnostic, but we would really like housing, affordable/workforce, we would like flex and small-bay industrial, we’d like regular industrial and we’d like retail,” Levy said.
They’ll look to focus on properties in the Mid-Atlantic and Southeast, including Richmond, the Baltimore/Washington, D.C. area, Hampton Roads, Charlotte and Raleigh.
Once funded, Levy said the goal is to exit each deal within three to seven years with the potential to replenish the $50 million pot in the future.
For its end of the deal, Levy & Co. takes a fee on each transaction and it also is putting skin in the game.
As part of the deal, Levy said his firm’s partners, including himself, agreed to put up some of their own funds to invest in along with the $50 million. The firm has made similar “skin-in-the-game” co-investments on deals it has helped finance in the past.
“Part of the agreement is that we will invest alongside them,” Levy said. “The amount is going to be meaningful because it’s our partners’ money.”
Acting as a steward of the funds is the latest example of Levy & Co. expanding beyond its traditional role as financing middleman.
In 2020 it partnered with a Maryland-based firm to roll the dice on a pandemic-era suburban office park deal. It cashed out of that, albeit earlier than expected, in 2022.
Also in 2022, the firm on its own acquired a Richmond apartment complex, initially with a condo conversion in mind. That plan was later tweaked to a buy-and-hold strategy.
As it begins to deploy the $50 million, Levy admits it’s not the easiest time to find deals.
“The market is wonky right now,” he said, adding, for example, that commercial property transactions in the Richmond market were down over 60 percent last year.
But he’s confident they’ll have the bulk of it disbursed by the end of the year or early next year and said they’ve already had discussions with property owners since word of the capital began to spread earlier this month.
Congratulations JBLco!