Taconic Capital Advisors is winding down its commercial real estate operation and is in advanced talks to sell one of the unit’s funds to Axonic Capital, according to people familiar with the matter.
James Jordan, who oversees the business, will leave the hedge fund firm in the first half of next year, according to an investor letter seen by Bloomberg. He’ll join Axonic and is expected to bring with him the latest vintage of Taconic’s CRE fund, which has about $200 million of commitments, said the people, who asked not to be identified discussing confidential information.
In exchange, Taconic will receive a share of revenue from the vehicle: CRE Dislocation Fund IV. The talks are ongoing and could end without a deal, some of the people said.
Representatives for Taconic and Axonic, which focuses on commercial and residential real estate, declined to comment on the talks. Both New York-based firms each manage about $6 billion.
Jordan will be a partner at his new firm, and other senior Taconic real estate members will join him at a later date, Axonic said in a statement.
“We see an extraordinary opportunity in the CRE market as the asset class undergoes a period of transformation and dislocation,” Axonic Co-Chief Investment Officer Clayton DeGiacinto said in the statement.
Jordan will report to the firm’s co-CIOs. He’ll also work closely with Jonathan Salter and Erik Nygaard, who lead Axonic’s liquid and illiquid commercial real estate businesses, according to the statement.
Taconic decided to focus on its core investment strategies of merger arbitrage and corporate and structured credit, according to the letter. In July, it side-pocketed CRE bets that sat in its $2.9 billion flagship Opportunity hedge fund. Those will now be sold. Taconic’s first three CRE Dislocation funds, with a combined $800 million of assets, will remain with the firm — though they’re in so-called harvest mode and returning capital.
“We are in the process of working with James to transition the management of our legacy CRE investments to a team focused entirely on managing these assets to optimal exits,” Taconic said in the letter.
The exact timing of Jordan’s departure hasn’t been set, and some team members will stay at Taconic to help with the transition, according to the letter. He’ll retain an advisory role with Taconic, according to the Axonic statement.
The U.S. commercial-property market has been under pressure, with higher borrowing costs weighing on valuations for office and apartment buildings. Lenders are also being squeezed as many borrowers struggle to address the valuation gap.
Taconic’s real estate business made event-driven and relative-value wagers in public and private markets, according to its website. The firm has invested more than $3 billion in direct real estate deals.
In addition to commercial real estate, Axonic focuses on securitized credit and commercial lending.
