As published in Lehigh Valley Business
By: Brian Pedersen
February 11, 2020 9:52
DLP Capital Partners of Hanover Township, Northampton County, announced the DLP housing fund last week at an investor dinner at ArtsQuest in Bethlehem that attracted more than 400 guests. At left, Don Wenner, CEO of DLP Real Estate Capital, meets with guests. (PHOTO/SUBMITTED) –
A local firm has begun offering a $1 billion private real estate investment fund that combines debt funding with equity investments.
DLP Capital Partners of Hanover Township, Northampton County, announced the DLP housing fund last week at an investor dinner at ArtsQuest in Bethlehem.
Company executives describe the fund as an “evergreen” or open-ended hybrid fund that combines the firm’s multifamily investment and direct lending strategies in a single fund.
“Historically, we have had two separate funds, lending and multifamily,” said Larry Hickernell, senior investor success manager of DLP Capital Partners. “Lending has always been a separate fund.”
On the equity side, DLP’s multifamily investment fund was a closed-end fund that expired at the end of a five-to-seven year term.
With the housing fund, DLP never plans to close it, since the firm will be buying and selling properties all year long, Hickernell said.
The housing fund is DLP’s eighth fund in eight years and it allows the firm to work with larger investors, he said. DLP targeted 12% or higher equity returns for this fund.
“They get the benefits of investing in real estate, but in a passive way,” Hickernell said.
The frequency of distributions is also different, as this fund allows the firm to provide monthly distributions to investors so they can grow their portfolio.
Overall, the housing fund offers investors greater flexibility. They have the ability to stay in the fund, buy more shares or exit if they want, said Richard Delgado, managing director of DLP Capital Partners. DLP structured the fund so investors can exit after a year.
Furthermore, DLP pays investors before the fund takes any money from them, added Hickernell.
Today, the company has almost 850 investors, whom Delgado described as high-net-worth individuals.
“People invest retirement money with us as well,” Delgado said. “We have a huge group of investors in the Lehigh Valley. When we did a $1 billion fund, we wanted to accommodate those larger investors.”
The target minimum investment for this fund is $250,000.
Throughout the year, DLP will conduct about 15 to 20 events to promote the housing fund to investors.
“We commit to no less than 5% invested cash,” Delgado said. “We are actually investing alongside them. Right now, the firm invests about 40% of its own money in its other funds.
For the housing fund, DLP is investing 5%.
Overall, many of DLP’s investors are long-term clients.
“People like staying with us because they like our returns, understand our strategy,” Hickernell said.
The housing fund allows DLP to buy assets that it can hold longer, which benefits investors greatly, said Delgado.
The source of these funds comes from non-luxury, affordable housing investments.
On the equity side, DLP buys affordable multifamily housing complexes, both apartments and houses.
“We think in America, there’s a huge shortage and that continues to grow,” Delgado said.
Apartments that typically rent for $600 to $900 are always going to hold as an asset in cyclical markets, and there’s particularly strong demand in the southeast, he said.
The firm then adds upgrades and sometimes provides better management to increase the value of the property.
“We do a lot to make these appealing places to live,” he added.
Since the firm offers short-term loans to investors, Delgado said there’s minimal risk.
“They get their money back very quickly,” Delgado said.
DLP Capital Partners is part of the DLP Real Estate Capital family of companies.