Värde Partners has closed its first real estate credit fund, a $500m vehicle that will invest in commercial real estate loans.
The Värde Scratch and Dent Fund will invest in secondary market portfolios, targeting performing and sub-performing loans in the US with principal unpaid balances less than $50m.
The firm will work with Texas-based FirstCity Financial to source, underwrite, modify or restructure commercial real estate loans, according to a memo from one of the fund’s investors, the Pennsylvania Public School Employees’ Retirement System (PSERS),
PSERS stated that it chose the Dent and Scratch fund because of its significant (10-15 percent) expected returns, even though blended portfolios of private equity funds typically deliver 18-20 percent returns.
“With our long history of investing in real estate through both credit and assets, we saw an opportunity to extend our investment program into the performing segment of this market to capture what we believe to be attractive returns and current yield,” said Marcia Page, the firm’s co-chief executive and co-founding partner.
“Seven years after the financial crisis, there continues to be a scarcity of capital and resources focused on small balance commercial real estate loans, which is driving a new set of opportunities for Värde.”
The 22-year-old Minneapolis-headquartered company specializes in alternative investments with assets of $10bn under management. The firm also manages distressed assets for its clients with a focus on corporate securities; consumer loans, structured securities, real estate and capital equipment.