Fidelity real estate arm to spin out

The Boston-based private equity real estate arm of Fidelity Investments, run by Michael Elizondo, is seeking investor approval to spin out on its own.

Fidelity Real Estate Group is seeking investor approval in a bid to spin out from its parent group Pyramis Global Advisors, a division of investment company Fidelity investment.

A Fidelity spokesman told PERE, the private equity real estate group, known as FREG, expected the deal to take place by the end of the year.

He declined to say whether the move was prompted because of losses in the unit’s value-added, debt and equities funds – or whether the group was hoping to take further advantage of the credit dislocation.

FREG’s value-add fund specialises in the redevelopment and repositioning of distressed real estate assets, as well as recapitalizing distressed sellers, according to the firm’s website. Investments range from $5 million to $75 million and include all sectors except unentitled land. Leverage is typically up to 80 percent, the website added.

Run by Michael Elizondo since 1995, Boston-based FREG has invested roughly $1.8 billion through its value-add vehicles up to the end of June this year, in 156 transactions. The Fidelity spokesman said Elizondo and the existing management team would stay in place.

“The existing management team will continue to manage the investments in the portfolio during this transition,” the spokesman added. He said the spin out would likely change its name from FREG.