“We had to turn investors away:” Distressed RE funds raising cash at breakneck pace

One debt fund raised $1.3B in two weeks

TRD NATIONAL /
Apr.April 21, 2020 05:00 PM
The coronavirus pandemic has put billions of dollars worth of commercial real estate loans on shaky ground. Distressed debt funds are having no trouble raising money to scoop them up. Some even have to turn investors away. (Credit: iStock)

The coronavirus pandemic has put billions of dollars worth of commercial real estate loans on shaky ground. Distressed debt funds are having no trouble raising money to scoop them up. Some even have to turn investors away. (Credit: iStock)

Florida-based firm Kayne Anderson just raised $1.3 billion for a distressed debt fund in just two weeks. It normally takes between a year to 18 months to raise that kind of cash.

“We had to turn investors away,” Kayne Anderson’s real estate head Al Rabil told the Wall Street Journal.

Investors looking to capitalize on the opportunities created by a pandemic-frozen economy are pouring billions of dollars into funds that plan to scoop up debt that lenders are now trying to quickly clear from their books, according to the Wall Street Journal.

As of early April, there were a record 939 commercial real estate funds worldwide looking to raise nearly $300 billion to fund debt acquisitions.

The growth in the number of funds illustrates the spoils many investors see as theirs for the taking.

“People have seen these quick recessions before and the opportunities that lie there,” said Preqin analyst Justin Bartzsch.

Sovereign wealth funds and wealthy families are the biggest pools of investors. Institutional investors such as pension funds and endowment funds aren’t making many bets yet because they’re most concerned with their stock portfolios or what college enrollments will look like, according to the Journal.

The opportunities on the horizon in the commercial real estate space are vast. There are indications that around 11 percent of commercial mortgages converted into securities will go delinquent in early May, more than the 10.3 percent peak during the 2008 financial crisis.

Some funds specializing in distressed debt investing were already well positioned to take advantage of the slowdown before coronavirus took hold across the globe — as of December, private distressed funds held $142 billion in dry powder. [WSJ] — Dennis Lynch


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