PERE Credit: Fortress’s Sloan on the intersection of distress and stability
Timothy Sloan, head of commercial real estate debt at Fortress Investment Group, says the firm sees the strongest long-term outlook for senior loans. But in today’s market, its history as a distressed investor will still be critical.
Fortress Investment Group has both a near-term and a long-term investment thesis, and the two are intersecting in today’s market. This includes the impact of a higher-for-longer rate environment, increased regulation for commercial banks and a $2.9 trillion wall of maturities through the end of 2028.
“Over the next two to five years, we will see a significant number of distressed opportunities because of that maturity wall,” Tim Sloan, vice-chairman and head of commercial real estate debt, tells PERE Credit in an interview at the firm’s global headquarters in New York in late August.
“In addition to that, today we are seeing opportunities to provide senior debt for commercial real estate borrowers. We think that will be the fastest-growing part of our
business.”
Fortress, which got its start in 1998 as a diversified investment management company, will be using every facet of its platform as it seeks to help commercial real estate sponsors and institutional investors solve problems. For sponsors, the firm can step into a variety of stressed and performing situations while seeking to align the loans it
originates with the income needs of its investor base.
“We have always had a very broad and diversified real estate strategy at Fortress, both debt and equity,” Sloan adds. “We have different products we can provide to our customers, borrowers and partners.”
None of this is new for the firm, with Sloan noting Fortress has always been a lender and investor in commercial real estate, working via diversified domestic and global debt and equity strategies to allocate capital across geographies, asset classes and capital structures.
“We don’t have a dedicated commercial real estate debt strategy in the US. Historically, when we have provided credit, preferred equity or mezzanine, we have done that through both open-ended and closed-ended credit-oriented lending strategies,” Sloan says.
“The firm can be creative in terms of how we structure those products, providing lower-cost senior debt if a borrower wants to bring in a larger amount of equity and reducing their leverage levels,” Sloan adds. “We can also provide a higher level of debt or originate preferred equity, mezzanine or common equity. We can solve a variety of needs.”
