Real-Estate Lender Plans Hedge Fund With 'Can't Miss' Strategy

Aug 1 2011 | 1:48pm ET

A Chicago-based real-estate lender says it has come up with a no-lose hedge fund strategy.

Clopton Capital is readying a hedge fund that will invest in what it calls the "fractured" commercial real-estate market. The new fund will lend to real estate deals with opportunities for big returns. Even if those deals result in default, however, the Clopton fund will both recover its initial investment and seize the property, Clopton said in a press release.

"The fund will be based solely on the investment criteria that any capital deployed will be secured two-to-one against income-producing commercial real-estate on a capitalization rate appropriate for the surrounding area," the firm said.

"For example, Clopton recently deployed capital for a rehabilitation loan located in the Chicago area," it said. "Despite contractor disputes and concerns, the loan was underwritten to then surrounding cap rate and the property, once stabilized in less than 90 days, was valued at a 50% value to contributed capital by Clopton exactly."

"This opportunity represented a 13% return for a 120-day investment of capital. Annually this represents a 39% return on capital, a previously unattainable number considering the low risk involved. The benefit of investing into Clopton alternative investments is that you receive a high return on capital and in the event of a default; you receive an even higher return."

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