Sponsored by Varadero Capital, L.P. and Treetop Development, L.L.C., as joint venture partners.
Firm Overview:
Varadero Capital, L.P.
Varadero Capital, founded in 2009, is a NY-based opportunistic asset management firm seeking to capitalize on niche investments across the credit markets. The firm has actively rotated across market sub-sectors since inception based on value-driven opportunities. It maintains an emphasis on investments with high risk-adjusted returns that will preserve capital through a wide variety of macroeconomic scenarios.
Approaching a 5-yr track record with a solid return profile, Varadero has successfully grown its asset base to c. $875 million. The strategy currently has a long-bias, employing limited leverage. Varadero Capital is an SEC registered investment advisor1.
1 Registration with the SEC does not imply any level of skill or training.
Treetop Development, L.L.C.
Treetop Development is a multi-faceted real estate company founded in 2005 and focused on HUD-supported properties nationwide as well as free-market and rent-stabilized properties in the New York metropolitan area.
Treetop’s expertise includes acquiring, improving, managing and repositioning underperforming and performing properties.
The firm currently manages approximately 6,000 units, approximately 3,200 of which are HUD-supported.
Opportunity:
Investment Strategy/Rationale –
- The Fund offers investors an institutional platform through which to invest in a unique, niche strategy that has not previously been offered in a fund format.
- Generate stable, attractive returns through the acquisition and repositioning of underperforming multi-family real estate properties, forming part of the Housing and Urban Development (HUD) project-based section 8 (PBS8) program, throughout the U.S.
- Projected return delivered through disciplined acquisitions, savvy property management, astute financing and timely disposition decisions.
- Stability of cash flows and limited counterparty risk – A vast majority of monthly rental revenue is received directly from the federal government, under contractual obligation.
- Barriers to entry – Operational burdens of the PBS8 program limit the interest of the larger real estate operators and create opportunities to acquire properties with high expected returns relative to other multifamily sectors.
- For U.S. taxpayers, depreciation of multi-family properties offers tax benefits.
Tenor and Sizing –
- Eight years (WAL: 5-6 years)
- Target equity capital raise of $150 million; expect to utilize financing levels equating to LTCs of 75%.
Targeted Return –
- Projected net IRR of 12-16%, with quarterly distributions.
Executive Bios:
Fernando Guerrero, Varadero Capital
Fernando Guerrero is Varadero’s majority-owner, Managing Partner and Chief Investment Officer. Previously, Fernando was Chief Executive Officer and CIO of Varadero’s former indirect affiliate, NIBC Credit Management, Inc. (“CMI”), where he was responsible for all aspects of CMI’s North American activities including its Investment Management business. Fernando was also a member of CMI’s investment committee.
Fernando has more than 25 years of experience in the structured credit markets and has worked on a number of first-of-their-kind transactions in the ABS and CDO markets, including several “Deals of the Year”. Before joining CMI, Fernando was head of the Global Structured Products Group at Merrill Lynch Investment Managers. The team was responsible for augmenting MLIM’s presence in the global CDO market by leveraging the team’s structured product expertise with the extensive capabilities of MLIM’s investment and research teams. Fernando and his team focused on distributing, structuring and managing CDO risk. Before joining MLIM, he was head of the global CDO effort at ABN AMRO where he was responsible for establishing the CDO business. Prior to ABN AMRO, Fernando was head of the Structured Products group at TD Securities where he founded the firm’s CDO business. Prior to TD Securities, Fernando helped establish Donaldson, Lufkin, Jenrette’s CDO business as part of its high yield capital markets effort. Before Donaldson, Lufkin, Jenrette, he was a managing director at BT Securities where he was in charge of the firm’s global structured finance business and emerging markets debt capital markets effort.
Azi Mandel, Treetop Development, The Aspen Companies
A hands-on leader with an extensive background in real estate development and construction. Azi Mandel formerly led a construction and asset management division, overseeing two million square feet, for a large NYC real estate syndicate which owned a number of trophy properties. He has extensive experience dealing with architects, engineers, and project managers. Azi maintains an active role in all construction and renovation needs of Treetop Development and works creatively to cut costs, while improving the assets of the properties. Azi also handles an array of dealings with banks such as, New York Community Bank, Signature Bank, and Investors Bank; and private and institutional investors, for example, Alex Brown Realty, Phoenix Realty Group, and Latus Partners, among others.
Adam Mermelstein, Treetop Development, The Aspen Companies
Highly regarded for his instinctual ability to recognize neighborhoods and properties with untapped potential, Adam Mermelstein has owned more than five thousand units in NYC and NJ and has overseen the construction and renovation of residential projects in the NYC Metropolitan area. He has a proven track record for acquiring, repositioning, and managing buildings with successful results. He is an expert at bringing out untapped potential in properties through increasing revenues, lowering expenses, and efficiently running real estate. Adam’s extensive market knowledge has allowed him to effectively transform existing properties and develop new ones that stand out in the marketplace.
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