Mack Real Estate Group (MREG) announced a major expansion of its real estate debt investment activities with the unveiling of a new lending platform focused on transitional and distressed assets throughout North America and in Europe.
The direct lending business will be managed by Mack Real Estate Credit Strategies (MRECS), a newly formed real estate investment management company headed by Richard J. Mack, CEO, and Peter Sotoloff, Chief Investment Officer.
Initially, MRECS will focus primarily on mezzanine, preferred equity, and first mortgage loans for properties in need of flexible capital and sponsors seeking an experienced, sophisticated real estate lending partner.
MRECS brings together the Mack family’s experience operating real estate credit strategy funds, commercial real estate securities funds, and investing in debt-based real estate opportunities at AREA Property Partners, with Peter Sotoloff’s multi-faceted background in real estate structured finance as a co-founder of Blackstone Real Estate Debt Strategies (BREDS).
“There are three reasons for launching this business now,” said Mack. “First, we believe that the returns currently available for loans secured by transitional assets in the United States, and for almost all European assets located outside of the very few top tier cities, will be superior to most other real estate investments, on a risk-adjusted basis.
“Second, Peter Sotoloff, whom we consider the best real estate debt professional in the market, has agreed to join us.
“Third, we are now able to invest with partners who supported us in our past businesses. We believe that they see the merits of continuing our previous, very successful real estate lending program, which was nearly unique in continuing to provide very positive returns even through the last downturn.”
Unlike Mack’s development business, where the company holds real estate assets with institutional partners indefinitely, Mack believe’s that real estate debt investments, with finite maturities, are well suited for limited-life investment vehicles
“Further,” added Mack, “we believe that high yield debt vehicles, when prudently managed by a firm with the proper combination of extensive lending experience and substantial real estate development and operational capabilities, will have the potential to provide investors with better risk-adjusted returns than other comingled vehicles that participate in the commercial real estate investment market. Many of our partners have recognized this distinction and are seeking out real estate debt opportunities as a result. Through this new institutional platform, we believe we have the opportunity to provide much-needed liquidity to borrowers, while mitigating downside risk through our cycle-tested experience at the asset level.”
Sotoloff added, “Private lending has a major role to play in today’s real estate debt markets. Real estate finance has experienced seismic changes since the last financial crisis. The landscape for borrowers is completely transformed.
“Financing options for transitional assets can be limited. As a result, we see tremendous demand for flexible, experienced lenders in that segment of the debt financing market, and limited competition. Our skill set is perfectly matched to the opportunity. I’m thrilled to help launch this business and look forward to maximizing its potential.”
Previously, Sotoloff served as Managing Director and Head of Originations of Blackstone Real Estate Debt Strategies (BREDS).
Before that, he was a Principal of Tribeca Associates. He also oversaw nonp-erforming loan acquisitions and global risk management strategies for the Morgan Stanley Real Estate Funds, and worked with the Goldman Sachs Whitehall funds earlier in his career.
In addition to other debt investment activities, Mack-controlled entities are currently developing approximately 4,000 units of multifamily property in the United States.
Mack Real Estate Group directly owns and manages approximately six million square feet of commercial real estate and real estate developments, and holds partnership interests in entities controlling in excess of 60 million square feet.