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Clarion launches dedicated debt platform

Looking to capitalise on opportunities in the US real estate debt markets, the New York-based investment manager has hired two former RREEF veterans to spearhead the new initiative.

Clarion Partners has hired industry veterans Drew Fung and Thanh Bui to significantly expand its presence in the real estate debt sector via a new dedicated platform. The addition of the former RREEF Real Estate executives allows the New York-based real estate investment manager to supplement its traditional real estate equity focus with a dedicated debt investment capability. 

“We are pleased to expand our debt business, particularly with two such highly-skilled professionals spearheading our program,” said Steve Furnary, chairman and chief executive officer of Clarion.  “Clarion has had a presence in real estate debt investing for many years, and this is an excellent time for us to broaden our platform to include what we believe are uniquely attractive segments of the debt sector.” 

Under the leadership of Fung and Bui, Clarion will be positioned to capitalise on opportunities the firm sees in the current real estate debt markets. For example, it believes that maturing commercial mortgage loans will require significant additional capital as the US real estate market continues to de-lever. Indeed, the firm’s research indicates that there will be a funding shortfall in the US of more than $200 billion over the next four years. 

“The US mortgage finance system is changing dramatically,” said Fung. “There have been clear shifts in the sources of debt capital, the complexion of the investments and the needs of both providers and users. Clarion’s new debt capability will look to fill some of those gaps.”

Based out of Clarion’s New York office, the new dedicated debt team will focus on various types of subordinated instruments backed by commercial real estate properties, including mezzanine loans, B-notes and select preferred equity interests. Capital will come from a mix of institutional investors, both domestic and overseas, and the vehicle for those investments will depend upon investors’ preferences, Fung said. He declined to speculate how much the new platform might invest over the coming year.

Fung joins Clarion as a managing director and head of debt investments following a 25-year career in real estate investment and debt capital markets. Prior to joining RREEF as head of US high-yield debt investments in January 2006, he oversaw the mezzanine/B-note programme at CWCapital, investing more than $700 million in subordinate debt transactions in just two years. From 1997 to 2003, he worked at Lend Lease, where he was instrumental in the creation and implementation of two separate mezzanine investment programmes that invested in high-yield, opportunistic projects. Prior to that, he served as vice president of capital transactions at Equitable Real Estate Investment Management, where he was responsible for acquisitions, the origination of new mortgage loans and the negotiation of mortgage workout strategies.

Bui also joins Clarion as a managing director, bringing 15 years of experience in real estate, capital markets and investment management to the firm. She will be a senior member of the debt investment team, with responsibility for programme development and implementation. Prior to joining RREEF as a vice president at the same time as Fung, Bui also was with CWCapital, where she was responsible for originating, structuring and underwriting high-yield debt investments.