Merchant Banking

Merchant Banking

Madison Capital’s “merchant banking” approach involves the firm taking a principal position in a transaction through a capital investment or imputed equity while raising outside capital. As an investment partner, Madison can bring one or more of the following to the table: Risk Capital, Organizational Support as well as Financial Structuring and Negotiating Expertise.

Madison makes these investments in order to:

  • Help supply the necessary capital to bring a project to the stage where institutional capital can be funded
  • Align its interests with those of the client
  • Demonstrate for institutional investors Madison’s confidence in the transaction
  • Achieve superior risk-adjusted returns for Madison and its investors

Case Study

Summary Property Data
Name of Property: The Strand
Type of Property: High-Rise Luxury Apartment Community/Retail
Location of Property: West Palm Beach, Florida
Number of Units: 275 units/12,000 sq.ft retail

Summary Transaction Data
Transaction Type: Construction Financing
Pre-development Capitalization: $55.6 Million
Client: American Land Ventures

THE STRAND

SUMMARY
Acting as exclusive financial advisor for American Land Housing Group Madison arranged $55.3 million in project financing for the Strand, a 275-unit luxury high-rise rental apartment development in downtown West Palm Beach, Florida. The financing includes a construction loan for 100% of the project cost and a bankable forward commitment converting to a long-term joint venture at final certificate of occupancy. Madison had made a principal investment of approximately 25% of the pre-development and land acquisition equity, and will retain an equity interest in the project. Located strategically in the heart of the revitalized West Palm Beach downtown, this mixed-use project, which also includes ground floor retail and five levels of parking, is being developed by ALHG, a Miami-based multi-family developer. Additionally, Madison sold, on behalf of ALHG, a one-half acre parcel adjoining the site for $4.25 million to a condominium developer.

MADISON ADVANTAGE
The Strand is a prime example of Madison’s multi-faceted approach to multi-family development projects. In this case it included a principal investment by Madison to help acquire the site, raising additional capital for land acquisition and pre-development, asset disposition of a portion of the site and finally arranging and structuring optimal project financing. By structuring a forward JV commitment with 100% construction financing, Madison was able to create an ideal capital solution for the developer.