JER buys $250m of US debt(2)

Private equity real estate firm JER Partners has acquired $250 million (€158 million) of commercial real estate debt over the past six months. The firm, based in McLean, Virginia, purchased a total of 12 loans and securities through its US debt fund, the US Debt Co-Investment Vehicle, a joint venture with JER’s financial REIT, JER Investors Trust.

The investments involve mezzanine loans and fixed and floating rate commercial-mortgage backed securities for various real estate assets including hotels, senior housing and office buildings.

In the wake of the credit dislocation, numerous private equity real estate firms have launched debt-focused funds or are restructuring existing funds to take advantage of the perceived mispricings in the market. Los Angeles-based Colony Capital is believed to be targeting $2 billion for its debt vehicle while Apollo Real Estate Advisors is also looking to raise a $1 billion debt fund targeting opportunities in Europe. The Blackstone Group’s €3 billion European real estate fund is also expected to go into debt in a big way.
 
JER said in a statement current market conditions were presenting opportunities in the real estate market.

However some industry professionals have warned there is too much capital chasing too few investment opportunities, with Paul Dougherty, president of Washington DC-based Perseus Realty Capital, recently telling PERE the deep discounts expected by many fund managers would fail to materialize: “I don’t see that much distress out there,” he said. “While there are over-leveraged properties on a select basis, many of the properties are in relatively strong institutional hands that won’t fire sale unless they absolutely have to.”