Madison Realty Capital, the New York-based real estate private equity firm, has closed a new debt investment vehicle with an investment capacity of up to $ 1 billion.
Madison will roll out its new debt strategy to target lighter value-added and core real estate transactions with a greater focus on income generation with rates from four to 7.5%.
The company will create and acquire senior and mezzanine loans as well as preferred stock investments backed by a diversified pool of transitional real estate assets.
The new vehicle also enables Madison Realty Capital to provide other alternative real estate lenders with financing solutions both on a single asset and on a global portfolio basis.
“The expansion of our product offering is in line with Madison’s approach of developing financing solutions to meet the changing needs of our borrowers and to seize more income-driven opportunities that we might have otherwise foregone.” said Josh Zegen, Managing Director and Co-Founder of Madison Realty Capital.
“This new strategy, which builds on the strengths of Madison’s core lending platform, will also allow us to offer investors a differentiated return profile while maintaining our commitment to generate risk-adjusted returns at through the cycles. “
A record amount of uninvested cash during the global pandemic is boosting growth in the private equity industry according to experts who report fundraising at massive levels this year.
Private equity firms have grown across geographies, sectors, and strategies despite extreme levels of market volatility, increased trading volumes, and disruption from COVID-19.
EY’s 2020 survey of global hedge funds found that total allocations to alternative investments remain relatively unchanged, however, competition between asset classes continues to intensify.
Allocations to hedge funds fell to just 23% in 2020, from 33% in 2019 and 40% in 2018.
Investments in private equity and venture capital remained stable at 26%, while investments in private credit increased from 5 to 11%, as many market participants predict that COVID-19 will initiate a cycle of credit that will create opportunities for these managers.
Another area of explosive growth is in Special Purpose Acquisition Companies (SPAC), with an almost three-fold increase in the amount raised in PSPC compared to 2019.
Managers have found these types of permanent capital structures to be an attractive way to raise capital, acquire companies and accelerate them to public markets. While a number of managers sponsor these transactions, traditional activist managers have been particularly represented in these transactions.
Socially responsible investing also continues to prove to be a promising growth path, according to EY.
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