Radco Acquires Its Third Midwestern Property

Posted on: July 22nd, 2013

Growth-capital-Financing In a positive sign for the durability of the residential real estate market, the Radco Companies has announced it acquisition of Lakewood Lodge in Northern Indianapolis. This is the company’s 20th acquisition of a residential property in the last 2 years.

Radco appears to be making a shrewd play on the rebound of real estate values that seem to be spreading through the United States. The Company has a few advantages in executing this aggressive acquisition program, regional focus and private capital backing.

While based in Atlanta, Radco has been concentrating its buying in the Midwest as of late. In March and June of 2013, Radco acquired units in Illinois.

The ability to regionally focus allows a real estate acquirer to better understand the micro economies and the local real estate trends more comprehensively. The Company appears to like the Midwest as it announced that there might be more acquired properties in the Midwest in the near future.

In addition, Radco’s access to capital is a strategic advantage to the Company’s business model. As a privately financed company, they do not have to answer to the public markets and do not have to meet the quarterly earnings estimates like other public acquirers do.

This allows them to buy at the right price and to invest in a property to be able to extract maximum value over the long term. The Company appears to have great momentum with its acquisition program.

This in itself allows it to see more deal flow and become a preferred buyer with many property brokers. Finally, Radco paid $16.5 million for the property, which has 454 apartments.

This results in an average per unit price of $36,343 which seems like a very good purchase price. Radco is on a rad streak and it will be interesting to see how far and fast they continue to go!

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.