Markaz, a Kuwait-based investment banking and asset management firm, has launched the US Distressed Debt Program, which will invest in non-performing and sub-performing commercial mortgages with net targeted annual returns of more than 15%.

The target size of the Markaz US Distressed Debt Program is $100m, of which Markaz is seeding $10m in proprietary funds. The investment period is two years, and the Program’s term is four years.

The program will be managed by MarGulf, the wholly owned US real estate investments arm of Markaz headed by Sami Shabshab.

Mr Shabshab said: “With over $1.2 trillion of commercial real estate mortgages maturing in the next four years, lenders will continue to face challenges. Sellers are, therefore, liquidating these distressed loans at large discounts to underlying collateral values. This is creating a unique opportunity to generate significant risk-adjusted returns by investing in sub-performing and non-performing first lien whole-loan commercial mortgages.

“The upside potential is great as gaining exposure to underlying real estate at low costs will enable us to reap the benefits from aggressive property management and forecasted improvement in economic conditions.

“The key opportunity drivers include the ability to acquire loans from distressed sellers at significant discounts, improved ability to select high-quality assets, capturing value through negotiating a workout / repayment with the borrower or through foreclosure and asset management, and downside protection through collateralized loans and borrower guarantees.”