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LRG launches $500m debt fund

After struggling to secure financing for its equity fund, LRG Capital Real Estate Fund I, the Larkspur, California-based private equity real estate firm decided to launch its own debt origination vehicle.

LRG Capital Real Estate has launched a senior debt origination fund after struggling to find suitable financing for its equity vehicle, LRG Capital Real Estate Fund I.

The Larkspur, California-based firm told PERE the $500m fund, LRG Capital Real Estate Debt Fund I, would concentrate on originating first mortgage loans with loan-to-values of around 60 percent as well as buying senior positions.

“This will be pretty conservative, but it’s unbelievable how many institutions are simply not lending,” said Lawrence Goldfarb, chief executive officer of LRG Capital and manager of the debt fund. “We struggled to get financing for our equity fund and so thought why don’t we lend and do it more quickly than the traditional guys did.”

The fund is hoping to close by the summer, and is looking to make loans of around $10 million, with fixed rates of around 7.5 percent and up to 30-year amortisations.

Goldfarb said the firm’s movement into debt origination was not a “stop gap” measure, but something that could last longer-term. “I think people will get used to dealing with firms like ourselves, as opposed to the banks,” he said.

LRG’s equity fund, LRG Real Estate Partners I, is targeting $100 million and will invest in all property sectors in California’s key cities. In January, the firm launched a hospitality fund to target restaurants struggling for capital in the wake of the economic downturn.

LRG Capital Hospitality Fund, which is targeting $50 million, will focus on early stage restaurant concepts in the US.