Lionheart Strategic Management Launches $250M Loan Acquisition Venture

In a partnership with Schroders Investment Management, the company will focus on transitional and distressed investments, addressing a greater need for liquidity following the onset of the COVID-19 pandemic.
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Lionheart Strategic Management LLC has entered into a loan acquisition agreement with Schroder Investment Management North America Inc. to target $250 million in real estate credit investments, focusing on transitional and distressed investment.

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The venture reportedly will co-originate transactions and source and service loan opportunities through Lionheart Real Estate Credit Strategies LLC. Lionheart is an affiliate of Fisher Brothers, a fourth-generation real estate owner and operator, that manages capital on behalf of third-party investors.

“We’re seeing incredible opportunities in the market as a result of the pandemic and its impacts on commercial real estate markets,” Winston Fisher, chairman of Lionheart Strategic Management, said in a prepared statement. “We continue to see high-quality investment opportunities backed by strong borrowers in fundamentally sound markets with significant downside protection given our targeted leverage points, locations and property types.”

Michelle Russell-Dowe, head of securitized credit for Schroders, added that Lionheart is “well positioned to help us allocate to opportunistic investments. Our loan acquisition agreement with Lionheart allows Schroders to continue to deploy capital through partnerships with real estate experts with shared credit discipline and patience.”

Christopher Peck, Peter Rotchford, Andrew Scandalios, David Giancola and JLL Global Capital teams advised on behalf of Lionheart in procuring capital for this strategy. Paul Hastings LLP was Lionheart’s legal counsel, and Ropes & Gray LLP represented Schroders.

Opportunities in CMBS rescue

Lionheart noted that the COVID-19 pandemic has increased CMBS loan default rates and “created a need for capital to provide liquidity to the marketplace.”

Citing data from Fitch Ratings, Lionheart stated that default rate for fixed-rate CMBS rose to 16.5 percent in the first half of 2020, or near the 2013 peak of 16.8 percent.

Lionheart further pointed out that “Many of the nearly $700 billion of construction loans that were originated in 2018 and 2019 will experience delays due to supply chain and labor issues … allowing for opportunities to provide rescue capital to undercapitalized sponsors.”

Schroder recently partnered with Benson Elliott Capital Management, of London, in the acquisition of a three-property Disneyland Paris hotel portfolio for about $282 million.