When things were going well in real estate and prices were on their inexorable rise to unsustainability, it was common to hear of investors refinancing assets in order to profit from the capital gain.

Cash-out refinancing involved literally that, the refinancing of an asset in order to take capital out of the project or building.

Today, however, as property prices rapidly fall from their peaks of 2007, cash-out refinancing has fallen by the wayside – and is steadily being replaced by cash-in refinancing.

“It's something we are seeing a lot of now and it's something we expect to see more of this year,” said Chris LaBianca, president of RCG Longview, which has just closed its latest real estate debt fund on $602.5 million.

The fund, RCG Longview Debt Fund IV, will target a variety of high yield real estate debt opportunities in the US including bridge loans, mezzanine loans, preferred equity positions and special situations. LaBianca adds that cash-in refinancing will play an increasingly important role in the fund's make-up.

With property valuations in the US back to 2004 levels, many owners who bought in the 2005 to 2007 bubble are facing (among other things) debt service coverage problems, much tighter loan-to-value lending requirements and the possibility that their equity has simply been wiped out. Anyone needing to refinance in this environment, LaBianca added, is therefore likely to face a gap in their capital stack.

“If you don't have equity sitting around to plug that gap, you need to find it elsewhere. It's an area of growing interest for us,” he continued.

The fund, which is about 20 percent invested, expects to achieve returns in the mid- to high-teens, mirroring the general increases in the cost of borrowing. Traditionally we'd be looking at mezzanine returning between 10 percent and 13 percent. Today we're getting between 14 percent and 17 percent.”

LaBianca said the firm is under no pressure to deploy its capital even though it has been bidding on a few deals in 2009. However, he added there would be “extensive investment opportunities” in 2009 meaning there was no rush to invest.

RCG Longview, which is jointly controlled by investment advisor Ramius and commercial real estate manager/owner The Feil Organization, started the RCG Longview Debt Fund series in 1999. The last vehicle, Fund III, closed in 2004 on $292 million.

Among New York-based RCG's investments is a $27 million mezzanine loan backed by an 82,510-square-foot mixed-use building on Fifth Avenue, New York. The loan was secured by the pledge of partnership interests in the property.

RCG has historically invested around half of its funds in the multifamily sector. LaBianca said retail was set to experience an extremely rough ride in 2009, with “more trouble brewing” for the office sector.