Liberty SBF, a Culver City-based alternative real estate lender, launched its first credit fund at the end of last month with a target raise of $100 million.
The “Liberty Credit Opportunities Fund I” will seek investments across various commercial real estate sectors focusing on owner user and SBA loans as well as multifamily bridge and preferred equity.
“They’re both equally compelling and it’s about finding the right flavor, the right mix from the portfolio management side to get the returns that we’re tracking towards,” Zev Nagel, Liberty’s newly appointed managing director of investment funds, said. Prior to this role, Nagel spent 12 years in a number of roles at Decron Properties Corp., a diversified real estate company based in Carthay, most recently serving as a senior adviser.
Liberty expects returns in the mid to high teens within four years, looking for investments of between $1 million and $15 million.
Nagel emphasized that this fund is a long-term vision, not a “one and done.”
“(We want) to build a platform that we can grow (and) that creates a fund management business for the firm because the resources are there, the deal flow is there and the track record is there,” Nagel said. “… The general idea is building on the last decade and a half of origination, servicing, raising capital, and doing it in a more expansive and growth-oriented way.”
Alex Cohen, chief executive and co-founder, is optimistic about Liberty’s first fund and said it has previously been financed through private equity investors. He sees this credit fund as “a natural extension of (Liberty’s) business.”
“We’ve developed and executed a 13-year track record utilizing large institutional capital from private equity and some family offices,” Cohen said. “The credit fund business is really an extension of what we’ve been doing but allowing limited partners the opportunity to get exposure to the types of assets that we originate.”
Liberty focuses on “small, balanced commercial,” Cohen said, with typical loan sizes ranging from $3 million to $15 million.
Cohen wants to keep benefiting from opportunities created by high interest rates in the last few years.
“A lot of assets were purchased in 2021 and 2022 at the top of the market using a lot of leverage,” Cohen said. “The asset values in the market have declined significantly as a result of the interest rate spike, and these borrowers (or their lenders) are in need of capital to resolve those issues and that presents opportunities for lenders like Liberty to participate in those recapitalizations.”
Additionally, Cohen finds that Liberty’s size and target areas create an edge for the company to generate attractive returns compared to larger scale asset managers.
“By being boutique, by focusing on specific strategies … and based on our track record of originating these loans, monetizing them and delivering returns for our non-fund investors historically, we think we could generate mid-teens type returns or higher, taking less risk than what other asset managers are focusing on in much larger markets,” Cohen said.
