06/16/2010

GoldenTree's Fund Group Ready to Go Solo

GoldenTree Asset Management is spinning off its real estate fund group.

The unit, GoldenTree InSite Partners, will start operating independently next month under the name GTIS Partners. GoldenTree Asset, a hedge fund manager and high-yield investor based in New York, will retain a minority interest, but won't invest any equity in two funds that GTIS plans to roll out.

The spinoff was envisioned when the fund group was formed five years ago under the direction of Tom Shapiro and Josh Pristaw. GoldenTree Asset founder Steve Tananbaum agreed that a spinoff could occur once the group reached $1 billion of third-party equity under management. The unit, which has set up two funds, recently hit that threshold.

New York-based GTIS will immediately turn its attention to launching two more opportunity funds: a $600 million vehicle targeting property investments in Brazil and a $300 million vehicle focused on residential plays in the U.S. GTIS would kick in 1.5% of the equity for each.

The Brazil vehicle, GTIS Partners Brazil Real Estate Fund 2, would seek an 18% return by teaming up with local operating partners to develop and redevelop Brazilian properties, with a focus on the office and residential sectors.

The initial $510 million fund in the series closed last year and is about 80% invested. Investors were told recently that it is on track to produce a return of about 25%. GoldenTree set up a $30 million co-investment vehicle in April to participate in a $90 million acquisition. The two vehicles bought a 50% stake in a Sao Paolo condominium development called Serido. That investment has a 40% projected return.

GTIS is charging a 1.6-2.0% management fee, depending on amount of equity committed. After investors receive a 12% preferred return, GTIS is entitled to 60% of profits until it amasses 20% of cumulative distributions. It then would get 20% of any additional profits.

The U.S. vehicle, GTIS U.S. Residential Strategies, will provide financing to U.S. home builders and buy distressed residential parcels. It follows on one of the strategies undertaken by GoldenTree InSite Real Estate Opportunities Fund 1, a $508 million opportunity fund that closed in 2007 and is about 80% invested. That fund, which also can invest in Europe and South America, has focused exclusively on U.S. residential plays since September. It has teamed up with partners to buy 20,000 single-family lots, condominium units and single-family houses in Arizona, Florida, Illinois and Texas.

GTIS U.S. Residential Strategies is designed to move quickly. It will have a two-year investment period - half of the typical timeframe. The sponsor is charging a 1.5% management fee. The profit split would be the same as for the Brazil fund, except that the preferred return is 10%.

Marketing will be overseen by Richard Cohen, who joined the team in April as a managing director. He was previously an equity-raising specialist at Morgan Stanley Real Estate.

Before forming GoldenTree InSite, Shapiro was a senior executive at New York-based Tishman Speyer for 17 years, and Pristaw spent six years as a principal and co-head of acquisitions at Coventry Real Estate Advisors of New York. At GTIS, they will retain their current titles: Shapiro is president and chief investment officer, and Pristaw is senior managing director.

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