GE Capital Real Estate has taken a significant step towards becoming a fully-fledged private equity real estate firm with the closing of its first vehicle.
The firm said it had raised $1.25 billion with partner Angelo Gordon & Co for the Legacy Securities Public-Private Investment Fund, which was launched in October last year.
The vehicle is designed to take advantage of the Public Private Investment Program (PPIP) in the US, which was introduced in the wake of the credit crunch to allow banks and other financial institutions to re-deploy capital and extend credit to both households and businesses. The equity commitments to the fund are being combined with an additional $3.7 billion in matching capital and leverage provided by the US Treasury, giving it an approximately $5 billion war chest to invest in eligible non-Agency residential mortgage-backed securities and commercial mortgage-backed securities.
GE and Angelo Gordon were among a selection of nine managers named as taking part in the programme in August 2009.
Since then, most have at least announced first closings. The most recent final closing announcement was made by Atlanta-based investment manager Invesco, which closed on $1.46 billion for its Mortgage Recovery Fund.
For GE, however, its fundraising has arguably greater significance because it has aspirations to become a large real estate investment manager rather than simply acquiring assets directly on its own balance sheet – its traditional way of operating. The first public indication that GE was moving into real estate investment management came in 2008 when Parsons told the Wall Street Journal the group was in the process of launching two private equity real estate funds, targeting between $1 billion to $3 billion.
In a statement about its fund close, Ron Pressman, president and CEO of GE Capital Real Estate, said: “Raising a fund of this size in the current economic environment is a significant achievement, and in line with our strategy of launching an investment management business.”
GE said investors in the vehicle were a “broad cross-section”, including corporate and public pensions, endowments, high-net-worth individuals and a sovereign wealth fund.
Last year, the firm showed it expected to focus its property funds on senior debt opportunities after appointing Skip Wells, its former managing director of origination within its real estate group’s strategy unit, to lead its expansion into the sector. The role was specially created for Wells, who will have responsibly for implementing investment strategies and supervising GE Real Estate funds.