Miami-based ARE Asset Management has launched two offshore investment funds to capture commercial and residential real estate investment opportunities amid what managing principal Jeffrey
Miami-based ARE Asset Management has launched two offshore investment funds to capture commercial and residential real estate investment opportunities amid what managing principal Jeffrey Kirsch sees as a new phase in the US credit and real estate markets.
The funds, registered in the British Virgin Islands, have begun investing in income-producing and opportunistic situations in the US real estate credit market. Kirsch has been acquiring and resolving non-performing mortgages on behalf of offshore private funds and individually managed accounts since 1996.
The funds’ investment strategy will comprise non-performing residential mortgages purchased at a discount and managed to recovery or foreclosure, as well as newly originated low loan-to-value hard money and bridge loans on commercial properties.
‘Although turbulence due to the repricing of sub-prime adjustable rate mortgages may continue, the US real estate market has stabilised somewhat, producing some unique circumstances,’ Kirsch says.
‘There is now a glut of real estate loans on the market as financial institutions sell off commercial and residential loans, and many property owners and occupants are working to restructure their loan obligations. Given today’s prevailing interest rate scenario, a US real estate portfolio based upon accurate appraisals and aggressive loan servicing has the potential to yield above-average returns.’
Kirsch argues that the fall-out of non-performing mortgages from mortgage-backed securities continues to make non-performing whole mortgage loans available from commercial and investment banks as well as hedge funds at significant discounts, enabling ARE to select precisely the assets it acquires. The new funds aim to benefit from the firm’s proprietary method of tracking real property market valuations throughout the US.
ARE’s new funds are structured as a variant of the master-feeder arrangement, with a fixed-income feeder providing leverage to a master opportunity fund. The ARE Fixed-Income Fund aims to deliver fixed monthly dividends to investors using highly collateralised, low principal risk investments. It is structured as an open-ended fund with a range of share classes, dividend rates and lock-up terms.
The ARE Opportunity Fund offers investors the potential for higher yields through direct investments in the portfolio. The funds are open to non-US accredited investors, such as high net worth individuals, mutual funds, hedge funds and institutions.
ARE has appointed Viteos Fund Services, a division of Viteos Capital Markets with offices in the US, India and the Cayman Islands, as its fund administrator. Viteos, whose backers include Credit Suisse, now has 35 clients and more than 160 funds comprising USD9bn in assets under administration.
ARE draws on a network of trading partners and service providers including American Residential Equities, which has bought, managed and sold more than USD1bn in non-performing mortgages and real estate opportunities; SeaBreeze Financial, an originator of hard-money and commercial property loans; and Plano, Texas-based loan servicing specialist Strategic Recovery Group.
