Oaktree Capital Launches Formida Capital in Dallas

There’s a party on Y’all Street, and everyone’s invited.

Texas’ answer to Wall Street isn’t just attracting the nation’s biggest banks; it’s also drawing in other corners of the financial services world, like Formida Capital, a middle-market lender launching in Dallas.

Formida is backed by funds managed by Los Angeles-based Oaktree Capital Management, a firm owned by Brookfield Asset Management that focuses on distressed debt. Formida will be headed up by former CEO of ST Residential, Wade Hundley. Jeffrey Giudice is coming on as managing partner and head of lending.

Hundley is on the hunt for office space in Dallas’ Uptown neighborhood, which is becoming headquarters for Y’all Street. By 2030, Uptown will be home to a $500 million campus for Goldman Sachs and a 30-story tower that will house Bank of America.

Hundley and Giudice spoke with The Real Deal about the role Formida will play in the real estate market and why the new company chose Dallas as its home.

What will Formida Capital specialize in?

Wade Hundley: There’s an opportunity in the middle-market, private lending space really created by the fact that the regional community banks are kind of on the sidelines these days in terms of new lending. They’re dealing with what they have internally now, and trying to modify and extend loans. But in terms of new loans for the commercial real estate, that, by and large, is absent from the marketplace, which is creating a kind of a liquidity gap that we think we can step in and help to solve.

Jeff Giudice: Our focus is really playing higher up in the capital stack. We’re happy to go up to 85 percent loan-to-value on a lot of these deals. The thesis is really driven by the fact that these local, regional community banks are out of the market. There’s less liquidity available to the middle-market sponsor. And that’s all happening at a time when the real estate market’s experiencing one of the largest value resets we’ve seen in a very long time. So there are a lot of these over-levered and upside-down capital stacks from people who bought deals in ’21 and ’22, and we’re here to help solve that.

Why Dallas?

Hundley: We think it’s a great place to do business. It’s also kind of becoming the capital markets hub of the South. There are a lot of private equity and banking firms that have relocated to Dallas in the last four or five years, and so we think it’s a great place to be headquartered. I can be almost anywhere in the country for a lunch and leave Dallas that morning.

Where will your office be located?

Hundley: We’re still looking for space right now, The Uptown area is where we’re currently focused. We will probably share space with a company called Bellwether, which is kind of a sister company to ours. Bellwether will be helping us with underwriting and servicing and asset management.

Given that other financial institutions are targeting that area for the headquarters of “Y’all Street,” what benefits will you get by locating there?

Wade Hundley: It’s a vibrant location where a lot of other firms and a lot of banks are located. We’ll be calling on those regional and community banks. There are a lot of other lending-type institutions and capital providers that are there, as well as a lot of real estate owners and developers. So, I think that’ll be a great place to operate. Just going to lunch, we’ll see people that we have relationships with, and there will be opportunities to do business all the time.

Who’s your ideal client?

Guidice: It’s going to be a wide range of different developers, sponsors and owners of real estate, whether they’re high net worth individuals, all the way down to the syndicators and institutional sponsors as well. We’re focusing on the middle market space, which we call $10 million to $75 million on the lending side.

Will you be focusing on specific asset classes or locations?

Guidice: We’ll be lending on all asset classes in all markets across the country with a focus on high-growth markets. We expect to do a lot of multifamily, hospitality, retail and industrial. We will lend on office and self-storage. We’re asset-class agnostic. We just want to write the best return investments we can.

What kind of financing will you provide?

Guidice: We’ll not only do senior mortgages and stretch seniors, but we will also do preferred equity and mezzanine loans. So we’ll be active in the sub-debt space and also participating loans and some direct equity.

Given the distress in the market, what level of risk are you comfortable taking on?

Guidice: This is going to be asset-based lending where the majority of what we do is non-recourse. So, we’re really going to be focused on the real estate. We do want to lend to good people, but that might include a sponsor who is a good person, good operator, but is liquidity-strapped because they have too many deals at once. We’re okay with that borrower.