Safe Harbor Equity launched a $100 million distressed commercial real estate debt fund ahead of a potentially looming recession.
The Miami-based private equity firm, which specializes in distressed commercial and residential real estate loans, is considering raising the fund up to $200 million, said managing director Ralph Serrano.
The Safe Harbor Equity Distressed Debt Fund 3 will focus on acquiring distressed commercial mortgages primarily in South Florida, in addition to markets like New York, Texas, California and other major marks in the U.S., Serrano said.
“While we do see a steady stream of defaults, it’s not required for there to be a recession for there to be defaults,” he said. But the goal is “to be well-positioned for the oncoming economic headwinds that are being forecasted.”
The fund is hoping to capitalize on banks looking get non-performing loans off their books. It will acquire distressed corporate loans starting at $500,000 and up to $20 million for properties that include multifamily, industrial, retail and hotels.
Safe Harbor launched two previous funds in 2015 and 2016. The first one purchased about $30 million of distressed loans, and the second acquired more than $100 million of loans. Both generated returns “in the [high] teens,” Serrano said. The firm also hired four employees to meet the demand it anticipates the third fund will generate.
Other investment companies have launched and closed similar funds ahead of an economic recession. Churchill Real Estate Holdings, a New York-based firm, has been trying to raise a a $200 million distressed debt fund focusing on a variety of real estate assets from failed condo projects to struggling retail properties.