American Ventures Launches $1B Distressed CRE Fund

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American Ventures Partners has introduced American Ventures Strategic Property Fund, with plans of raising $1 billion to invest in distressed commercial real estate across the U.S. The investment vehicle is designed to offer a tax-advantaged structure to non-U.S. investors.

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The fund will target under-water Class A properties, particularly premier office assets, available at deeply discounted prices and valued in excess of $50 million. Real estate investment manager American Ventures expects to find the best off-market and formal bid opportunities for well-located assets in markets with low costs of living and low taxes, including locations in Texas and Florida, both of which are regions where the company has been active in the past.

Upon acquisitions, American Ventures will manage the properties, relying on its proven experience with value-add practices to bolster occupancy, rent and cash flow. As part of the fund’s terms, the portfolio will maintain a low to moderate level of leverage and control tenant size as well as industry exposure.

American Ventures has a strong record to support its expertise in the field of distressed investment. Over the last 30 years, Philip Blumberg, chairman of American Ventures, has formed four successful distressed commercial real estate funds, all of which materialized just before or in the midst of market turmoil. In a prepared statement, Bloomberg said the company has never lost investor capital, even in economic downturns.

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While most experts aren’t anticipating the big real estate sales spikes seen during the Global Financial Crisis more than a decade ago, the emergence of a pool of distressed assets as a result of the current economic downturn is an inevitability. “Even with anticipation of a temporary dislocation, some investors and lenders will not be able to hold on even with the finish line for the pandemic in sight,” according to a January 2021 report by Real Capital Analytics.

Other investment firms focusing on the distressed market include Lionheart Strategic Management, which launched a $250 million loan acquisition venture targeting transitional and distressed investments in January. And according to the Commercial Real Estate Observer, BH Properties got an early start, launching a $200 million fund for the acquisition of troubled real estate assets in July 2020.