Siguler Guff & Co., a U.S. private- equity firm that expanded into troubled real estate during the credit crisis, is poised to raise a second property fund to acquire assets while prices remain below 2007 highs.
“Given the opportunities in the marketplace, we have deployed the capital in our first fund fairly rapidly,” said James Corl, a managing director in charge of distressed real estate investing at the New York-based firm. He declined to comment on potential fundraising.
A new pool would follow the firm’s $630 million Distressed Real Estate Opportunities Fund from 2010, which invested with more than 12 managers including Lennar Corp. (LEN)’s Rialto Capital Management LLC unit and a real estate fund run by Paulson & Co., the hedge-fund firm owned by John Paulson, who made billions betting against subprime mortgages.
“If there’s one theme throughout all the managers we’ve partnered with, it’s that they’re good at timing the cycle,” Corl said in an interview. “They know how to sell at the top and be aggressive bargain hunters at the bottom.”
Closely held Siguler Guff, which manages more than $10 billion, is among companies expanding property holdings after the demise of several of Wall Street’s largest real estate fund investors, including Goldman Sachs Group Inc. (GS)’s Whitehall unit and Lehman Brothers Holdings Inc. The once-dominant groups were undone by borrowing excessively to acquire assets during the commercial-property bubble that burst in 2007.
U.S. commercial real estate prices remain 22 percent below their peak after climbing 28 percent from the November 2009 bottom to October of this year, according to a report on the Moody’s/RCA Commercial Property Price Indices released today.
Siguler Guff’s initial real estate pool made its commitments through funds, joint ventures, separate accounts and direct investments in properties. The firm invested more than $200 million with Rialto and is the biggest investor in its first fund.
Lennar’s Rialto buys delinquent and defaulted mortgages at discounts to the original loan amounts and squeezes value out of them by going after borrowers and working out repayment deals, Corl said. The unit of the Miami-based homebuilder has bought loans on retail and hotel properties with an average balance of less than $2 million, a market overlooked by larger funds, he said.
Siguler Guff’s initial fund also pledged $56 million to Boca Raton, Florida-based Crocker Partners LLC, which redevelops and manages office properties, including the Miami Center, a 34- story downtown tower.
“Miami is transitioning from a secondary market into a true gateway city, which will lead to occupancy and rent growth,” Corl said.
Through a joint venture with Crocker, Siguler Guff last month bought an office park outside Jacksonville, Florida, for about $40 a square foot, Corl said. The same property was valued at more than $150 a square foot in 2005, he said.
The firm also has invested almost $60 million with Atlanta- based Weeks Robinson Properties, an investment and development firm co-founded by warehouse specialist Ray Weeks. Outside the U.S., Siguler Guff has invested in properties in the U.K., Germany and the Netherlands.
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