Mack Real Estate Group plans to raise more than $750m for a new real estate debt fund it will launch with the help of Peter Sotoloff, a former Blackstone lending executive who made a surprise exit from that firm in June.
Managed by Mack Real Estate Credit Strategies (MRECS), a newly-formed company headed by Mack co-founder Richard Mack and Sotoloff, the fund will focus on transitional and distressed assets throughout North America and Europe.
MRECS will also provide first mortgages and trade real-estate securities through a hedge fund. It will focus initially on mezzanine, preferred equity, and first mortgage loans for properties in need of flexible capital.
“The returns currently available for loans secured by transitional assets in the United States, and for almost all European assets located outside of the very few top tier cities, will be superior to most other real estate investments, on a risk-adjusted basis,” Mack said, in a statement.
Sotoloff helped found Blackstone Real Estate Debt Strategies (BREDS), serving as managing director and head of originations. News broke in April that he would be departing, effective in June, at which point market rumors swirled that he would seek to build a similar business elsewhere.
MRECS does bear similarities to BREDS, which has its own three-pronged structure, made up of a debt fund business engaged in mezzanine lending, a mortgage REIT and a CMBS-trading business.
“We plan to build a preeminent real estate debt investment platform,” Sotoloff said, in a statement. “Financing options for transitional assets can be limited. As a result, we see tremendous demand for flexible, experienced lenders in that segment of the debt financing market, and limited competition.”
Mack Real Estate Group, headed by Richard Mack and his father, William Mack, manages the Mack family’s capital through investments in real property and related securities, specializing in domestic and international real estate investment, development and financing opportunities. The Wall Street Journal first reported on the new fund.