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Cornerstone Raises $315M for Debt Investment Club, Closes Mortgage Fund

Cornerstone Real Estate Advisers is closing its Cornerstone Enhanced Mortgage Fund LP after a raise of $315 million from domestic and international institutional investors for a club-style debt investment vehicle.

The fund, designed on the club concept of fewer, select investors, invests in first mortgage debt secured by real estate that has undergone an ownership change or other transition as a result of recent financial conditions. The fund seeks investments with strong sponsors, locations and business plans over a two- to five-year period. Yields will be achieved through a combination of fees, current coupon and potential upside participation.

In addition to the $315 million raise, Cornerstone also received a mandate from an institutional investor in 2011 for a $200 million separate account based on a similar strategy.

“There is growing interest in debt investing among institutional investors right now, partly in response to volatility in equity real estate and aggressive pricing in core equity real estate,” Robert F. Little, Cornerstone’s chief investment officer – finance, said in a statement.

“We think market conditions and trends, including the liquidity-constrained financing market, market-wide repricing of assets, and distress-motivated trades suggest that attractive returns could be available,” he added.

The fund is consistent with Cornerstone’s practice of assembling smaller groups of like-minded investors to pursue a given strategy. “This fund has been very well received, with both new and existing clients participating,” said Little.

Little, who is an industry veteran with more than 20 years experience, will also serve as portfolio manager.

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