Forgestone Capital was formed eight years ago and has grown into a full-service real estate investment company with $ 6 billion in assets under management and an additional $ 1 billion in development projects.
Along the way, Forgestone assembled a team of 19 people with expertise in planning, development, revenue analysis, asset management and debt financing. Its three main areas of activity are: private equity; advisory and asset management services; and a mortgage fund.
Properties with which Forgestone is involved include: TELUS Garden and Royal Center in Vancouver; 777 Bay Street in Toronto; Gold House in Burnaby; and the Forest Glen shopping center in Kitchener.
Forgestone initially focused on closed opportunity funds that invest both directly and with like-minded partners. There are no restrictions on asset class or geography, although the main markets of interest are the Greater Toronto Area, Vancouver, Montreal and Ottawa.
“We’re staying active and looking at all kinds of different things in the post-COVID environment,” CEO Trevor Blakely told RENX. “We are completing our third fund this year, and then we will take a look at what tea leaves are showing in the market in terms of deploying a fourth fund.”
Forgestone Mortgage Fund SEC
The Forgestone Mortgage Fund LP open-ended fund has been around for a year and a half and has been the most significant area of growth for the Toronto-based company during the pandemic. It has capital just north of $ 300 million, which is about 50 percent deployed.
“We think like principals because we are capital players, but we lend like partners,” said Blakely. “Almost all of the deals we get involved in are partnerships. “
Over the past year, most loans have been made on first and second mortgages of up to 85%.
Emphasis was placed on industrial, multi-family and land sectors in key Canadian markets, as these are the most liquid sectors. Mortgage Investments President Stefan Simonyi said RENX Forgestone will consider other asset classes as well, according to the sponsor.
Loan decisions are usually made within 24 hours, according to Blakely.
The typical loan amount is $ 5 to $ 50 million. Simonyi said the sweet spot is between $ 10 million and $ 20 million, but Forgestone is also looking at deals of $ 50 million to $ 100 million.
“The borrower is very important and essential to us in the way we look at it because we want to make sure that we are lending to the right groups,” said Simonyi.
While declining to name specific partners, Blakely said all have proven business plans, strong balance sheets and expertise in areas such as land rights, land use planning, industrial rent rollovers. and multi-family and the expansion of buildings.
“All of our partners have specific expertise in the markets and areas we want to develop,” said Blakely. “Instead of waiting for brokers to come and show us deals – and we’re happy to work with brokers – we identified people who really understand their business and could benefit not only from our money, but also from our creativity. and within our competence. “
Simonyi said the growing partners are the ones the firm is most interested in working with:
“This is not one deal, it is the next five deals that we will make together.”
Forgestone’s loan program may include:
– repositioning of assets, bridging loans and portfolio loans;
– first, second and mezzanine mortgages;
– fixed or variable interest rates;
– loan terms ranging from one to five years, with flexible repayment options;
– a pledge not limited to real estate assets;
– without recourse and repatriation of capital;
– become a shareholder through its value-added or opportunity funds;
– provide future capital for value-added projects;
– the recapitalization of the portfolio with groups that own several buildings with longer term debt;
– and loan / value ratios greater than 75% to 85%.
“We take a very proactive approach with our partners who are bidding on assets and looking to buy assets,” said Blakely, who plans to finalize an additional $ 100 million in loans over the next six months.
“We have a good pipeline of activities right now,” he said, noting that the mortgage fund will look to raise more money in 2022.
Advisory and asset management services
Through its advisory and asset management services, Forgestone strives to deliver attractive risk-adjusted returns to high net worth institutional, foreign and private investors. He represents 17 investment groups on the board side and Blakely said most have more than one deal with the company.
Forgestone can handle small and large-scale projects, from long-term basic investments to development and value-added income projects.
Third-party advice makes up the bulk of Forgestone’s business, with approximately $ 4 billion in assets under management. The business is focused on larger core assets in which Forgestone invests, in on- or off-market transactions, with stakes ranging from 50 to 100 percent.
“It’s a direct buy-side advisory job,” said Blakely. “The difference is that we don’t just close the deal or be in a partnership together, we stay as an asset manager or in other roles throughout the process.”
Consulting business was Forgestone’s slowest growing industry in 2020 due to the pandemic as most customers were on hiatus for six months, but Blakely said business is picking up. It is now doing more industrial and multi-family operations due to unknowns in the retail and office asset classes.
Future growth of Forgestone
Forgestone is exceptionally well capitalized across all of its compartments, according to Blakely.
While looking to continue to develop its three core business areas, Blakely said Forgestone is also working on building new silos and platforms.
Blakely initially believed COVID-19 would have a greater negative impact on real estate, but is now cautiously optimistic about the future, especially in major markets.
“Despite the exodus that we saw during COVID, with the increase in immigration and people returning to more normal historical lives, we believe that the positives brought by major markets will be restored.”