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Colony closes debt fund on $900m

The Los Angeles-based private equity real estate firm spent one month raising capital for its distressed credit fund, raising a total of $900m from existing investors. The fund is expected to invest in distressed property debt and operating companies with strong real estate components.

Colony Capital has closed its distressed real estate debt fund on $900 million (€587 million) of commitments after spending just one month fundraising, PERE has learned.

According to people familiar with the matter, the firm finalized the fundraising for the Colony Distressed Credit Fund last month, after approaching longtime Colony backers for commitments.

PERE reported in April Los Angeles-based Colony was quietly lining up $1 billion in equity to take advantage of the current market dislocation.

Founder and chairman Tom Barrack led efforts to raise the fund, which is expected to start investing in distressed property debt and operating companies with strong real estate components. The fundraise took around 30 days, sources told PERE.

In his latest “Chairman’s Corner” newsletter on Colony’s website, Barrack predicted commercial real estate would continue to suffer from the credit crisis, with commercial loan spreads continuing to widen and North American developers suffering a string of defaults. In housing, he forecast, the “real problems [were] just beginning and [there is] no clear solution in sight.”

He went on: “The best place to prospect for ‘long’ emerging opportunities is most likely at home. It contains all the ingredients of an intriguing opportunistic investment: volatility, lack of transparency, confusion, over-leverage abound, lack of homogeneity in products, long-term stability, and government intervention.”

The fund is the latest in a line of debt-focused vehicles being raised by private equity real estate firms. The US real estate division of Bahrain-founded investment firm Investcorp launched its $1 billion (€648 million) debt fund, Investcorp Real Estate Credit Fund, this week, while Shorenstein Properties is targeting debt opportunities with its $2 billion Shorenstein Realty Investors Nine fund.