Warburg Pincus and The Bascom Group have formed a $200 million (€160 million) joint venture to invest in non-performing loans and distressed multi-family properties amid a softening residential housing market.
The joint venture will target both non-performing and sub-performing loans by investing in the underlying senior and mezzanine debt and will target deals in the $1 million to $100 million range. The two firms will also look for distressed properties to buy directly.
Borrowers of high-interest-rate conduit loans that originated in the 1990s are struggling to repay their obligations due to high defeasance costs and even higher loan-to-value ratios, according to a statement released by Bascom.
The joint venture will allow holders of non-performing and sub-performing loans to quickly dispose of distressed assets because the new fund can close on an all-cash basis, according to the statement.
Irvine, California-based Bascom, which often makes value-added investments in multi-family properties, has completed more than $3.8 billion of acquisitions since its inception in 1996. In 2006, the firm has acquired $700 million worth of properties through September.
Warburg will invest out of Warburg Pincus Real Estate 1, its first dedicated real estate vehicle, which closed recently on $1.2 billion. The fund is focusing one-fourth of its assets on North America, a fourth on Europe and half in Asia, Michael Profenius, Warburg’s head of real estate, told PERE during a recent interview.
In addition to the distressed plays in the US, Profenius said Warburg is likely to make demographics-driven investment in sectors such as senior housing.