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Clairvue looks to deploy Fund I in 2011

After closing its third deal, the San Francisco-based firm said the scale of opportunities in the US recapitalisation market could see it invest the remainder of its $250m debut fund this year.

Clairvue Capital Partners could be on course to fully invest its $250 million debut fund this year, after closing its third recapitalisation deal this week. The San Francisco-based firm confirmed it had just closed on a $25 million preferred equity infusion in the $275 million Phillips Edison Shopping Center Fund III, a deal that followed two other recapitalisations totalling $80 million.

With more than $3.2 trillion of outstanding commercial real estate debt in the US as of the third quarter 2010 and roughly $500 billion of loans set to mature in 2011 alone, recapitalisation opportunities are being seen as one of the best risk-adjusted strategies for opportunistic investors.

As banks get healthier, they are starting to deal with borrowers, restructuring loans or absorbing losses and foreclosing on assets. That wasn’t the climate throughout much of 2010.

Clairvue Capital Partners
co-founder Jeff Giller

Clairvue co-founder Jeff Giller said the firm expected recap deals to remain “robust” for 2011 and into 2012, as banks and borrowers finally started dealing with their legacy portfolios. As such, he told PERE, Clairvue could “invest the balance” of its Capital Partners I fund, which held a first close on $250 million in June after securing a commitment from Goldman Sachs’ private equity funds.

“There is still a lot of debt rolling over, both in the US and Europe,” said Giller. “As banks get healthier, they are starting to deal with borrowers, restructuring loans or absorbing losses and foreclosing on assets. That wasn’t the climate throughout much of 2010,” he noted, adding “2011 will be a much bigger year for recaps than 2010.”

In its deal with Cincinnati, Ohio-based Phillips Edison, Clairvue provided $25 million to help the firm pay down a credit facility, secured against the 2005 vintage-year fund. Clairvue co-founding partner Brendan MacDonald added that Phillips Edison had the right to take over Clairvue’s investment after a certain period of time. “Like most funds of this vintage, cap rates rose after the deals were closed. However, Phillips Edison has done a good job of leasing up space at their assets and stabilising their shopping centres.”

In December, Clairvue also closed on a $20 million recapitalisation of a multifamily platform, involving an operating company and property company structure. MacDonald declined to comment further, but he said there was a growing need for recapitalisation equity targeting secondary market assets. Clairvue’s first deal involved providing a $60 million credit line to a $450 million fund closed by Normandy Real Estate Partners in 2006.