ING Group NV's real estate unit has raised $730 million in the United States to buy high-yield commercial real estate debt.
"Demand was very strong, we could probably have raised more," said David Blight, the 45-year-old chief executive officer of ING Real Estate Investment Management, the world's largest property fund manager. "The challenge is to get it invested, as liquidity has to a large extent dried up."
Spreads on commercial mortgage-backed securities, bonds backed by mortgages for hotels, offices, and malls, have gotten "so out of kilter'' that investors wanted to exploit the arbitrage, the Australian executive said in an Oct. 4 interview in his office in The Hague.
The closed-end fund, which has an eight-year life, is targeting a net return of 15% a year. To achieve that it will have to invest in debt instruments with higher yields. Spreads are higher now than they were in 1998 after the collapse of Long-Term Capital Management LP.
ING said it plans to invest the money, which may rise with some leverage, in the next 24 to 36 months.