Archway Capital Launches $100M Real Estate Opportunity Fund II
Archway Capital LLC, a leading alternative investment manager specializing in real estate debt, has officially launched its second vintage of the Opportunity Fund strategy—Archway Opportunity Fund II. The new fund is targeting a $100 million capital raise, with plans to reach this target by the end of 2026. This initiative will continue Archway Capital’s track record of identifying opportunities in the real estate debt sector, deploying capital to generate attractive returns for investors while focusing on risk-adjusted strategies.
Archway Opportunity Fund II will focus on a comprehensive investment strategy, providing a versatile approach to the dynamic real estate market. The fund’s investment scope includes a broad range of debt investments, such as senior and junior loans, preferred equity investments, and distressed opportunities or special situations. With this flexible mandate, the fund is positioned to take advantage of a wide variety of market conditions and asset types across the commercial and residential real estate sectors nationwide.
The investment strategy will be deployed across multiple real estate asset classes, including multifamily, retail, industrial, office, and mixed-use properties. This diverse allocation gives the fund the ability to capitalize on opportunities in several different sectors, offering investors exposure to a broad swath of the real estate market.
Target Returns and Income Expectations
Archway Opportunity Fund II’s target total return is projected to range from 11% to 15% annually, net of fees, with an anticipated current income component of 4% to 5% annually. These figures reflect Archway’s disciplined approach to investing in real estate debt and the anticipated risk-adjusted returns the fund aims to generate for its investors.
The fund will not utilize leverage in its portfolio, which is a key distinguishing feature. This unleveraged approach is designed to reduce the risk associated with market volatility and ensure the fund maintains its focus on generating stable, sustainable
returns. By avoiding the use of leverage, Archway aims to manage risk while positioning the fund for long-term success in a fluctuating market.
Fundraising Strategy
Archway anticipates that a significant portion of the capital raised for the Opportunity Fund II will come from existing limited partners—investors who have partnered with Archway since its inception. These established relationships are an essential part of the firm’s business model, reflecting the trust and long-term commitment between Archway and its investors.
Bobby Khorshidi, the CEO and CIO of Archway Capital, spoke to the current state of the commercial real estate market and how Opportunity Fund II is uniquely positioned to take advantage of evolving market conditions. “The commercial real estate capital markets have been in gridlock due to the high interest rate environment causing transaction activity to be sluggish,” said Khorshidi. “However, we believe sentiment across the space is changing as transaction volume begins to increase. While traditional funding sources have been slow to react to these changes, Opportunity Fund II is poised to deploy fresh capital and earn risk-adjusted returns on quality assets where sophisticated borrowers are unable to access credit from traditional lenders.”
Navigating a Changing Market
In a time of high interest rates and market uncertainty, Opportunistic funds like Archway Opportunity Fund II play an essential role in filling the gap left by traditional lenders. With the commercial real estate capital markets in a state of flux, real estate investors and developers are looking for fresh capital to help them seize opportunities and move forward with projects that could add value in a recovering market.
Archway’s borrowers are typically experienced real estate entrepreneurs, with a proven track record in executing short-term business plans aimed at improving the value of underperforming or distressed properties. These borrowers benefit from the ability to access flexible, creative capital solutions when they are unable to secure financing from traditional banking sources. As a result, Archway’s investments allow these sponsors to execute their business plans and enhance property values.
The business plan of each project typically involves improvements and operational strategies designed to increase the value of the property, thereby increasing the equity cushion that protects the loan. Once the property has been improved and its value has increased, the borrower will typically exit the investment by either refinancing or selling the property. This exit strategy provides Archway with the opportunity to realize attractive returns on its investments, while also mitigating risk through a focus on assets with potential for value appreciation.
A Comprehensive Approach to Real Estate Debt Investments
Real estate debt investments can offer several advantages, including the potential for stable income generation, capital preservation, and the ability to capitalize on market inefficiencies. With its targeted senior loans, junior loans, preferred equity, and distressed asset strategies, Archway Opportunity Fund II is designed to offer a diversified approach to investing in real estate debt, while focusing on high-quality, risk-adjusted returns. This broad mandate allows the fund to take advantage of a variety of opportunities across different real estate asset classes.
The fund’s distressed opportunities or special situations investments may include assets that are underperforming or have financial difficulties but show potential for significant value enhancement. These types of investments often require a more active management approach, and Archway’s expertise in underwriting, structuring, and managing real estate debt positions it to navigate these situations successfully.
Furthermore, the fund’s ability to invest in a range of commercial and residential real estate asset classes across the United States provides broad exposure to various market dynamics and economic cycles. Whether targeting the multifamily sector, which has seen strong demand due to the increasing need for affordable housing, or the industrial sector, which has benefited from the growth of e-commerce and logistics, Archway Opportunity Fund II is well-positioned to take advantage of the opportunities that arise as the real estate landscape continues to evolve.
The Importance of Strong Partnerships
One of the most significant elements of Archway Capital’s strategy is its commitment to forming long-term relationships with its investors and borrowers. The company places a premium on trust and reputation, which has been a cornerstone of its success in the alternative investment space.
Khorshidi emphasized that the firm’s partnership-driven approach allows Archway to navigate challenges and execute its strategies effectively. “We have built strong relationships with both our investors and our borrowers, and this has been a key factor in the success of our past funds,” he said. “Our partnership approach enables us to take a thoughtful, hands-on approach to each investment, ensuring that we deliver strong results for our investors while helping borrowers achieve their goals.”
