Mack Expands Debt Investment Activities with Launch of Mack RE Credit Strategies
- Oct 30, 2014
Mack Real Estate Group is launching a new lending platform for transitional and distressed commercial real estate assets in the United States and Europe and has tapped a former Blackstone Group managing director to help run it.
The direct lending business will be managed by Mack Real Estate Credit Strategies¸ a newly formed real estate investment management company headed by Richard Mack as CEO and Peter Sotoloff as chief investment officer. Sotoloff previously served as managing director and head of originations of Blackstone Real Estate Debt Strategies. He left the firm in June to pursue other opportunities.
Sotoloff said he was excited to be joining forces with the Mack family – father William and son Richard – to co-found MRECS. The Macks have deep roots in CRE with firms like Apollo Real Estate Advisors, Mack-Cali Realty Corp. and AREA Property Partners, an international real estate management firm which they sold to ARES Management L.L.C. in May 2013. Several months later, they launched Mack Real Estate Group with another family member, Stephen Mack. It manages the family’s capital, institutional capital and high-net-worth capital through real estate investments.
The Wall Street Journal reported the Macks and Sotoloff also hope to raise more than $750 million for a new private equity real estate debt fund.
“We plan to build a preeminent real estate debt investment platform, relying on our extensive combined experience of creating value for investors in the real estate debt space, while providing capitalization solutions for borrowers,” Sotoloff said in a release. “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 leaders in that segment of the debt financing market, and limited competition.”
MCRES will initially focus on mezzanine, preferred equity and first mortgage loans for properties in need of flexible capital and sponsors seeking an experienced lending partner.
William Mack said there were three reasons for launching MCRES now.
“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,” Mack said in the release. “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.”
Sotoloff was one of the founding members of the BREDS unit while at Blackstone and helped build it into a $10 billion multi-strategy debt investment platform. Prior to joining Blackstone, he had been a principal at Tribeca Associates, where he managed acquisition, financing and development activities.
In addition to other debt investment activities, including Claros Fund Management L.L.C., a CRE securities hedge fund, Mack-controlled entities are developing about 4,000 units of multifamily properties across the U.S. MREG owns and manages approximately 6 million square feet of assets and holds partnership interests in more than 60 million square feet. It is also the majority owner of Winthrop Property Management.