LMREI’s management team has a proven track record throughout all stages of the economic cycle, including:
Previous Funds Under Management:
Kearny Street Real Estate Company. This portfolio of over $1.4 billion in distressed real estate debt was acquired by the Morgan Stanley Real Estate Fund in 1993. The team proceeded to acquire portfolios from Union Bank, Industrial Bank of Japan and Bank of California, comprising over $360 million in properties and loans. All of these funds exceeded return expectations, generating over 50% per annum in aggregate.
Mountain AMD. The Mountain AMD portfolio was one of only two previous Public-Private Investment Partnerships formed with the FDIC in 1994. This portfolio of over $350 million in real estate and distressed real estate debt was acquired in 1993 from the failure of two banks (Columbia S&L, Englewood, CO and First Nationwide Bank) through a partnership with the FDIC. The fund generated approximately 40% returns to investors as reported by the FDIC Valuation Advisors at Mid America Institute. These outstanding returns were largely a result management’s experience dealing with real estate operations and workouts. Instead of immediately disposing of the assets and hurriedly winding down the portfolio, management evaluated individual borrower quality, business plans, and market data realizing value in a strengthening market. By doing this the fund exhibited a slower disposition rate than the other FDIC partnership, but had a much higher recovery ratio of 178% compared to 135%.
ING Real Estate Investors (“INGREI”). INGREI managed and invested in both real estate equity and sub performing debt. The fund consisted of over $350 million in performing, non-performing and sub-performing debt in partnership with the FDIC. In addition to Mountain AMD, ING also originated and/or managed additional real estate and loan investments totaling over $650 million in value, with similar returns.The WMF Funds. Prior to joining Latitude, LMREI’s principals managed three funds that invested in value-add real estate debt, with over $432 million in aggregate assets.
Current Funds Under Management:
Legg Mason Real Estate Capital II, Inc. (“LMREC II”) LMREC II is the fifth real estate debt fund created by management since 1997. LMREC II has generated investments of over $1.65 billion in value-add real estate assets and securities since 2005. The Fund has originated over $1.3 billion in value add real estate debt ranging in size from $10 million to $75 million prior to the current market cycle. LMREC II utilizes a proven origination system and a national platform of traders, bond holders, mortgage bankers and brokers to originate loans, purchased securities and acquire distressed notes ranging in size from $10 million to $75 million. The fund has invested in approximately $315 million in real estate securities, including approximately $100 million of AAA CMBS purchased in the last twelve months. Securities are held to generate yield through maturity of the notes as the funds strategy is to purchase assets that will payoff at par. Leverage is provided by two CDOs issued by LMREI totaling in excess of $1 billion and two bank facilities totaling $85 million.
Legg Mason Real Estate Capital, Inc. (“LMREC”) LMREC is fully invested in value-add real estate debt assets, and made its final investments in August 2005. LMREC invested $661 million in value-add real estate debt assets over its 30-month investment period. LMREC utilizes a conservative underwriting strategy tailored to value-add assets. LMREC has generated strong risk-adjusted return during a period of volatile equity fund performance and low fixed income yields.
Chesapeake Real Estate Investors II, LP. (“Chesapeake II”) Chesapeake II is the successor fund to Chesapeake. Its strategy is to capitalize on the current capital market by purchasing commercial real estate (“CRE”) securities trading below fundamental value, and acquiring CRE loans from financial institutions that are forced sellers due to distress or a lack of operational capabilities. Securities are generally held to generate yield through maturity of the notes as the fund’s strategy is to purchase assets that will payoff at par. Thus far, the fund has exclusively invested in AAA CMBS and invested in excess of $11 million through four different positions since January 2009.
Chesapeake Real Estate Value Investors, LP. (“Chesapeake”). Chesapeake is a value fund that invested primarily in multi-family and retail real estate assets in eight to ten key markets throughout the western and southern United States. The Fund invested in properties with value add potential through re-leasing, redevelopment, renovation, replacement of management and/or reducing expenses. Assets generally have current cash flow and are managed by proven real estate operators in the target markets. Typical investments were privately negotiated transactions ranging in size from $2 million to $10 million in Chesapeake equity.So Cal Equity. LMREI’s principals have acquired and managed a number of single-asset equity transactions. These equity transactions have the same strategy as Chesapeake’s investments, namely, value-add real estate. These investments represent over $100 million in assets.