Orlando fund, N.C. firm partner up to invest in Florida companies

Orlando Sentinel - March 11, 2010

A North Carolina investment company and its Orlando partner firm said Thursday they plan to invest at least $77 million in high-growth Florida businesses as part of a big expansion in the state.

Charlotte-based CapitalSouth Partners LLC and Florida Mezzanine Fund LLLP of Orlando said they expect to evaluate about 100 companies this year as candidates for "venture loan" financing. Their goal is to sign close to a dozen deals.

They announced their first new deal Thursday in Fort Lauderdale, though they did not disclose the terms of the financing for Coral Springs-based Great Healthworks Inc. Several Orlando-area companies are also said to be on the partnership's radar, though no local deals have been signed yet.

CapitalSouth CEO Joseph B. Alala III said his firm has committed at least $50 million to the Florida market, on top of $45 million it has already invested in recent years.

By making Florida Mezzanine its marketing arm in Florida, CapitalSouth expects to dramatically increase its small-business investments in the state, Alala said. Florida Mezzanine also brings its $27 million fund to the table.

The two firms specialize in "mezzanine" loans a hybrid form of equity financing for businesses that are already established, profitable and growing. Mezzanine lenders provide relatively high-interest, short-term financing secured by the target company's cash flow, in exchange for an equity stake.

CapitalSouth has invested hundreds of millions of dollars in companies across the country, Alala said, and has set up a $425 million fund for potential deals in Florida, Texas, North Carolina and other high-growth states.

"We have that much to invest anywhere in the U.S.," Alala said. "If we find all those deals in Florida, we can invest it all there."

The partnership with CapitalSouth is considered a breakthrough for Florida Mezzanine, formerly known as Gator Mezzanine Fund. Established in 2007 by local entrepreneur Seth Ellis and investment banker Michael Poole, the fund has had a tough go of it during the recession and has made only two investments. Poole withdrew as a partner in the fund late last year, though he is still an investor. He cited a need to focus on his investment banking firm, PCE Investment Bankers, Gator Mezzanine's original partner.

Ellis, a well-known deal-maker in the local venture-capital community, said CapitalSouth's commitment to Florida will provide a badly needed infusion of financing amid the ongoing credit freeze that many companies are experiencing.

"Florida really needs a way of getting its own mezzanine growth capital, since most companies have to go outside of Florida to get it," he said. "We're just trying to get the word out that we're looking for really good growth companies we can fund and that will help create badly needed jobs."

Richard Burnett can be reached at rburnett@orlandosentinel.com or 407-420-5256.

Orlando Sentinel. All rights reserved.