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ICONIQ makes minority investment in Madison Realty

The move comes as commercial real estate debt investments are moving toward the mainstream.

ICONIQ Investment Management, a San Francisco-based wealth management company, has acquired a minority stake in New York commercial real estate private equity firm Madison Realty Capital.

The investment, the size of which was not disclosed, will allow Madison Realty to expand its commercial real estate lending platform. This includes growing its global network of institutional relationships, expanding its product offerings and augmenting its team.

The investment comes as Madison Realty Capital, which got its start nearly 20 years ago, completed $6.4 billion of transaction volume in 2021. The firm also closed a $2.08 billion fund, Madison Realty Capital Debt Fund V, its largest-ever debt vehicle, and formed a $500 million partnership with Newbond Holdings to target first mortgages, mezzanine loans and preferred equity investments in US hotel properties.

The firm, founded by Josh Zegen and Brian Shatz, underscored that Madison Realty’s investment and management process and day-to-day operations will remain the same. Madison Realty had an existing relationship with ICONIQ, Zegen added, noting the manager’s investment expertise and network are complementary.

“We look forward to expanding our footprint across the US, developing new relationships with top-tier borrowers, lenders and developers, and accelerating the growth of our business to the benefit of our global, institutional investor base,” Shatz added.

For ICONIQ, the appeal stems from Madison Realty’s long track record of investing across market cycles. “The firm is one of the most active private real estate lenders in the US and we believe continues to differentiate itself as a lender of choice for borrowers seeking flexible financing solutions with certainty of execution,” said Sam Kurtzman, portfolio manager at ICONIQ.

The transaction also comes as commercial real estate debt is moving to the mainstream, filling a unique role in institutional portfolios. A survey of 111 institutional investors by affiliate title PERE, published in February, found 26 percent of respondents are planning to increase their allocations to commercial real estate debt in the next 12 months, with another 29 percent saying they would continue to invest at their current level.