Angelo, Gordon launches new RE strategy – exclusive

The US alternative investment firm is targeting $750 million for its new real estate debt fund.

Angelo, Gordon & Co, the New York-headquartered alternative investment firm, is getting a new commercial real estate debt fund off the ground. The firm launched the strategy in a webcast to investors last week, according to sources invited to the presentation.

The Commercial Real Estate Debt Opportunities Fund (CREDO) is targeting $750 million. The firm expects to hold a first close towards the end of the fourth quarter or in the beginning of 2016, and to complete fundraising in nine months, sources told PDI

Angelo Gordon declined to comment. 

Unlike the predecessor vehicle, the AG Securitized Asset Recovery Fund (STAR), which raised $550 million in 2012, the new fund will only target commercial real estate assets. The prior vehicle invested in structured products including both commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS). The new strategy is being led by Andrew Solomon, AG’s head of real estate debt. 

CREDO plans to invest in a combination of legacy CMBS assets, as well as deals that have been done since the financial crisis in CMBS 2.0 and 3.0 structures. It will also target single asset and single borrower CMBS transactions.  

With risk retention rules coming into play next year, Angelo Gordon is also seeing opportunities in the purchase of CMBS B-pieces of new deals. And further in 2017, it could do some opportunistic direct lending, explained a person familiar with the vehicle. 

The fund is targeting 12-14 percent net IRR. The predecessor STAR fund, which has now finished investing, posted a 14 percent net IRR. 

CREDO charges a 1.5 percent management fee and a 20 percent performance fee on an 8 percent net hurdle rate, with an 80/20 catchup. It will also issue semi-annual distributions to investors of around 4-6 percent per year.