A US fund targeting distressed property in American cities has generated almost half of its US$100 million (Dh367.3m) in commitments from Gulf investors. Tate Capital Real Estate Solutions, a US-based property firm, plans to acquire apartment buildings for a deep discount after a year that saw foreclosure proceedings started against about 3.9 million homeowners in the country.
About 45 per cent of the money that has so far been deployed by the fund originates from Gulf investors, according to Mark Desario, the chief executive of LRIM Investment Management, a private equity research firm in Dubai. LRIM linked up with Tate early last year to find regional investors for the fund. An additional $100m is expected to be collected by June. Mr Desario said most of the funds came from wealthy individuals, family businesses or financial institutions.
"They are people who are familiar with the US marketplace. Many may have schooled there," he said. "All are looking for reasonable annualised returns, even if it's over a period of time." Millions of homes in the US have been lost to banks as job losses continue to mount and salaries are squeezed. A record 1.81 million US home loans were classed as "non-performing" last month, according to Amherst Securities Group.
The fund will focus on properties that are occupied and have an operating income. "What we're trying to do is meet or beat what investors would make on an income return from a financial institution like a bank, and give them the upside of a property on appreciation level," Mr Desario said. Tate has also eyed opportunities to acquire distressed property in the UAE, but is "sitting on the sidelines" for the time being, said James Tate, the president of the company.
"Our research in the local market showed that, although the Government had worked diligently to preserve the value of the market - and we applaud them for their efforts as well as the manner in how they reacted expeditiously - the negative market forces were too great and the only solution is a natural correction," Mr Tate said.