AllianceBernstein has held a final close of more than $700 million on its first commercial real estate debt fund, AllianceBernstein Commercial Real Estate Debt Fund. The vehicle primarily will target first mortgage loan investments ranging between $15 million and $75 million in size and backed by transitional properties throughout the US. In a statement, the firm said it is pursuing “yield opportunities that have resulted from a liquidity gap, as many traditional providers are unable to underwrite transitional credit.”
The new fund closing follows the firm’s capital raise for its debut private equity real estate vehicle, AllianceBernstein US Real Estate Partners, which closed in April 2012 on $680 million in capital commitments from Singapore’s Temasek, the Alberta Teachers Retirement Fund and institutions in the US, Hong Kong and Japan. The vehicle also attracted more than $200 million in co-investment capital.
PERE understands that AllianceBernstein is focusing on senior debt rather than mezzanine debt, which typically pursues similar return targets to that of equity investments and therefore could potential pose a conflict or perception of conflict with the firm’s real estate equity strategy. While mezzanine debt often targets returns in the mid- to upper-teens, senior debt returns tend to be in the single digits.
The firm also is building a separate commercial real estate debt team that will be headed by Roger Cozzi, who joined AllianceBernstein as chief investment officer of commercial real estate debt at the beginning of the year. Cozzi most recently served as chief executive of Gramercy Capital, a publicly-traded REIT and specialty real estate finance company, and previously held senior investment positions at iStar Financial, Starwood Capital Group and Goldman Sachs.
“As we look to grow and diversify our client offerings, moving into commercial mortgage debt is the next logical step for us,” said Jay Nydick, co-chief investment officer of AllianceBernstein’s real estate group, in a statement. “With the expertise Roger brings in transitional loan investments, together with our robust existing infrastructure in real estate and credit analysis, we think we can take advantage of unique opportunities in the commercial mortgage market that hopefully should provide clients with attractive risk-adjusted returns.”