Federal Capital Partners Closes $230M Fund, Will Seek Debt Investments

Armed with a $230 million private equity fund that could allow up to $900 million in investments, Federal Capital Partners said it would continue to seek deals on value-added assets, but would also move into lending. “While FCP’s investment strategy in the past has been focused on acquiring under-managed and under-capitalized assets in need of repositioning and reinvestment, this fund format gives us tremendous flexibility to also work with existing owners and lenders who may need debt or joint venture capital in this challenging climate,” Esko Korhonen, FCP co-founder & managing partner, said in a news release. FCP said the fund, FCP Fund I, L.P., is fully discretionary and targeted to equity and debt instruments in residential and commercial properties and land in the Mid-Atlantic region. The real estate investment and operating company headquartered in Washington, D.C., said it expects to use modest leverage in the fund, which would allow approximately $800 million to $900 million of total investments. The firm also announced that it had established a line of credit funded by a consortium of banks led by JPMorgan Chase. “We are extremely pleased with our ability to raise capital in a difficult financial environment and appreciative of the support shown by a very sophisticated group of investors,” Korhonen said. FCP’s investors are generally pension funds, endowments, high net worth individuals and families and financial institutions. Korhonen told Washington Post columnist Thomas Heath this week that FCP would be interested in assets and loans that could be put up for sale under the $700 billion bailout passed last week by Congress. Since its founding in 1999, FCP has focused mainly on acquiring value-add apartment, office and industrial properties in the Washington, D.C., metropolitan region, renovating and repositioning them and either holding on to them for cash flow or selling them. Last month, the firm bought Toledo Plaza, a 242-unit, value-add apartment community in Hyattsville, Md., for $18 million. FCP plans to spend at least $8 million upgrading the property. Toledo Plaza is one of three properties FCP has purchased since January for a total outlay of approximately $200 million in acquisition and renovation costs. The others are The Monterey, a 432-unit, Class A apartment property in Bethesda, Md., and Park Berkshire, a 598-unit apartment complex in Forestville, Md. Earlier this year, CPN reported that FCP had sold Shirlington Gateway, a 207,000-square-foot, Class A office building in Arlington, Va., to Choi Cos. L.L.C. for $62.5 million. FCP had purchased the property in July 2006 for $55 million, according to the March 28 CPN report. Korhonen founded FCP in 1999 with Lacy Rice, a former Carlyle Group colleague. The two were joined by partner Alex Marshall and a year ago by Tom Carr, the former chairman & CEO of CarrAmerica Realty. Between them they have more than 80 years of experience in real estate investment and have successfully navigated through numerous economic downturns, so they feel well-positioned to get through the current financial crisis. Since 1999, FCP has acquired more than $1.2 billion of assets, primarily in the Washington, D.C., and Baltimore areas.