Sam Zell has launched a $625 million credit fund to target distressed commercial real estate securities, according to a report by Bloomberg.
The veteran investor has already raised $125 million in equity for the Zell Credit Opportunities Fund from one investor, regulatory filings show, after starting to raise capital in July.
The report added that a pair of unidentified investors have backed the vehicle.
Data research company PPR predicts there is more than $1.4 trillion of US commercial real estate debt set to mature between 2010 and 2012 alone, with $478 billion expected to come due in 2010.
In floating its mortgage REIT recently, Brookfield Asset Management said in regulatory filings that refinancing “will not be an option for many borrowers”. Financial institutions are lending a fraction of what they did at the height of the real estate bubble in 2005 to 2007, while CMBS issuance has fallen from a peak of $230 billion to $1 billion in 2009 to date.
“The current disconnect between the need to refinance commercial real estate debt and the limited availability of financing options, together with a shift toward origination and retention of loans, will provide companies that have experience both originating and investing in real estate debt across the capital structure with current opportunities to originate appropriately structured, well-underwritten loans to experienced owners on high-quality properties,” Brookfield added in its SEC filings.
The fund launch marks a departure for Zell from just last spring when he told an investor forum hosted by NAREIT that he saw “little opportunity in the US” and even less in “Western Europe”.
In the wake of the credit crisis though, and the sheer level of debt set to mature in the coming five years, that opinion has changed globally, with many investors seeing the US and Western Europe, particularly the UK, as the new “emerging” market.