Madison Realty Capital, the New York City based real estate private equity firm, has closed on a new debt investment vehicle with up to $1 billion of investing capability.
Madison will deploy its new debt strategy to target lighter value-add and core-plus real estate transactions with a greater focus on income generation with rates of four to 7.5 percent.
The firm will originate and acquire senior loans and mezzanine loans as well as make preferred equity 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 on both a single asset and overall portfolio basis.
“Expanding our product offering is consistent with Madison’s approach of developing financing solutions to meet the evolving needs of our borrowers and to capture more income-oriented opportunities we might have otherwise had to forego,” said Josh Zegen, Managing Principal 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 generating risk-adjusted returns across cycles.”
A record amount of uninvested cash during the global pandemic is driving growth in the private equity sector according to experts who report fundraising at massive levels this year.
PE firms have been expanding across geographies, sectors and strategies despite extreme levels of market volatility, increased trading volumes and disruptions due to COVID-19.
The 2020 EY Global Alternative Fund Survey found that total allocations to alternative investments remain relatively unchanged, however, the competition between asset classes continues to intensify.
Allocations to hedge funds shrunk to just 23 percent in 2020, compared to 33 perc ent in 2019 and 40 percent in 2018.
Investments in private equity and venture capital remained stable at 26 percent, while investments in private credit increased from five to 11 percent as many market participants anticipate COVID-19 initiating a credit cycle that will create opportunities for these managers.
Another area of explosive growth is special-purpose acquisition companies (SPACs), with a nearly threefold increase in the amount raised in SPACs compared to 2019.
Managers have found these types of permanent capital structures to be an attractive way to raise capital, acquire companies and fast-track them toward the public markets. While a number of managers are sponsoring these deals, traditional activist managers have been particularly represented in these transactions.
Socially responsible investing also continues to prove to be a promising avenue for growth, according to EY.