Fund Managers

Brookfield and Marathon float debt REITs targeting $800m

The two real estate fund managers are turning to the public markets to raise capital for their next debt vehicles. Brookfield Realty Capital Corp. and Marathon Real Estate Mortgage Trust are targeting $500m and $300m respectively.

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Brookfield Asset Management and Marathon Asset Management have floated two debt REITS in a bid to raise a total of $800 million from the public real estate markets.

The two firms are the latest in a line of private fund managers hoping to take advantage of the capital inflows into the public markets. Barry Sternlicht’s Starwood Property Trust REIT raised $810 million in new equity earlier this month – $310 million more than its original target.

According to regulatory filings, Brookfield Realty Capital Corp. will target $500 million in equity. The REIT will originate and purchase new commercial mortgages, including whole mortgage loans, bridge loans, B notes, mezzanine loans, CMBS and debtor-in-possession financing.

Brookfield already manages two real estate finance funds, the $600 million Brookfield Real Estate Finance I (BREF I) and $727 million BREF II. The funds have purchased and originated 50 investments with an aggregate principal balance of $3.9 billion. Brookfield said in the filings that “only one loan was non-performing and two loans were sub-performing with restructuring negotiations in progress”.

Marathon Real Estate Mortgage Trust meanwhile is targeting $300 million in equity, with a focus on non-agency residential mortgage-backed securities, residential mortgage loans, CMBS and some commercial loans. The REIT will also invest directly in whole pools of agency RMBS.

In July, Marathon was selected by the US Treasury as one of nine fund managers to take part in the legacy securities public-private investment programme (PPIP). According to filings, Marathon Real Estate Mortgage Trust will invest in Marathon PIPP assets.

Marathon’s mortgage servicer and special servicer, Marix Servicing, will also be used to deal with sub-performing and non-performing residential loans purchased by the REIT.

“The decline and dislocation in the US real estate and credit markets presents us with unique opportunities to invest in discounted mortgage-related assets,” Marathon said in the filings.

Other private fund managers targeting the public markets include Bayview Asset Management, minority owned by The Blackstone Group, Colony Capital, Apollo Global Management and Ladder Capital.