Varde Partners has closed a $500 million fund that will invest in commercial real estate loans, the firm’s first real estate focused fund.
The fund will target real estate loans with principal unpaid balances below $50 million, according to a statement. The fund offering, called the Värde Scratch and Dent Fund would be looking at performing and sub-performing loans in the US. Varde plans to invest the capital by buying portfolios in the secondary market and having their own origination teams, the firm announced earlier today (17 June).
The fund will work with Texas-based FirstCity Financial to source, underwrite and modify or restructure commercial real estate loans, according to a memo from the Pennsylvania Public School Employees’ Retirement System (PSERS), one of the investors in the fund.
According to the note, PSERS has chosen the Dent and Scratch fund because of its significant(10-15 percent) expected returns, even though this may be lower than the 18-20 percent returns on blended portfolios of private equity funds.
“With our long history of investing in real estate through both credit and assets, we saw an opportunity to extend our investment program into the performing segment of this market to capture what we believe to be attractive returns and current yield,” Marcia Page, the firm's co-chief executive and co-founding partner, said in a statement. “Seven years after the financial crisis, there continues to be a scarcity of capital and resources focused on small balance commercial real estate loans, which is driving a new set of opportunities for Värde.”
The 22-year-old Minneapolis-headquartered company specializes in alternative investments with assets of $10 billion under management. The firm also manages distressed assets for its clients with a focus on corporate securities; consumer loans, structured securities, real estate and capital equipment.