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LOS ANGELES-Now that it’s close to closing a $200-million fund backed mainly by institutional investors, Legg Mason Real Estate Investors is planning a new mezzanine value fund of up to $100 million, with commitments to the new fund expected to come primarily from high net-worth individuals.

Glenn A. Sonnenberg, president of Legg Mason Real Estate Investors, tells GlobeSt.com that the new fund will likely be offered in the summer and fall and will invest in the same general types of properties as the existing fund. Sonnenberg explains that Los Angeles-based Legg Mason Real Estate Investors, an arm of Baltimore-based Legg Mason, prefers multifamily properties in strong markets like the Sunbelt and Mid-Atlantic region, suburban rather than CBD assets, neighborhood retail centers, and multi-tenant rather than single-tenant industrial properties. The new venture will look at hospitality properties too, but “no more than 10%” of the fund will go to that product type, Sonnenberg says.

Legg Mason likes grocery-anchored neighborhood centers in a number of different markets as long as they are places with barriers to entry to new supply, Sonnenberg says, meaning it is “willing to be in some markets that some of our competitors aren’t willing to be in.” Suburban markets are viewed as more stable than CBDs because the tenant base tends to consist of a more diversified group of businesses that are “more likely to stay there because their homes and clients are near their offices.” Similarly, Legg Mason sees less risk in multi-tenant than in single-tenant industrial investments.

The new fund will complement an existing fund, Sonnenberg says. The existing fund–due to close in May–is financed primarily by large institutional investors like the New York State Teachers Retirement System and the Pennsylvania Public School Employees Retirement System, John Hancock and Nationwide insurance companies and government entities like the Kuwait Fund. By contrast, probably two-thirds of the new fund will originate from individuals and foundations, with the rest from institutional investors. As with the previous fund, Legg Mason will co-invest in the new venture.

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