CASE STUDY

High Yield Debt Group

A well-established and very successful real estate pension fund advisor focusing on direct investments decided that they needed to offer more products to their clients. They had been using moderate leverage but recognized that they didn’t know enough about investing in debt instruments within commercial real estate. They were considering acquiring an existing group or the de novo building of a new division to complement their direct program. The goal was to offer clients a debt program/product line with core to high yield opportunities.

Peters & Associates was retained to provide them with the optimal solution for these goals. We researched a range of debt investment programs: from the originators of loans that constructed real estate bond portfolios to the CMBS investors who purchased them to the participants in the emerging high-yield markets of distressed debt investing. We then set up a series of meetings with groups and individual investors who were active in these real estate debt markets. Our goal was to find people who knew both the top-down dynamics of capital markets and the bottoms-up fundamentals/dynamics of commercial real estate markets.

We accessed a wide range of practitioners by explaining the advantages of familiarity with our client. This ‘Win-Win’ approach provided our client with quick and comprehensive knowledge and enabled it to select the approach that they could best integrate in their existing platform. They ultimately chose to build a de novo group headed by an industry veteran whom we identified and recruited — one of a very few at that time who had a working knowledge of both bond and commercial real estate markets and experience in real estate debt investing.