Fortress Investment Group has entered the core-plus real estate market with the launch of Fortress Real Estate Exchange, a 1031 exchange platform targeting private wealth investors. The New York-based manager, which has been active in opportunistic real estate for over a decade, is now raising capital through Delaware statutory trusts (DSTs) to acquire institutional-quality properties. The move comes as core-plus opportunities have become more attractive following interest rate hikes and market consolidation.

Eli Edwards, head of US real estate equity at Fortress, explained that the firm previously avoided core-plus due to oversaturation and unfavorable risk profiles. However, rising interest rates since 2022 and the exit of several competitors from the market have created an appealing entry point. The platform will initially focus on senior housing, multifamily, and student housing, with target allocations of 40%, 40%, and 20% respectively. Fortress aims to raise $100 million-$200 million this year, scaling to $500 million-$1 billion annually within two to three years.

DSTs have attracted average annual fundraising of approximately $5 billion over the past five to six years, with $8.4 billion raised in 2023 alone. David Hammerman, Fortress's chief operating officer of real estate equity, expects DST fundraising to double in size over the next decade. Unlike traditional commingled funds, DSTs raise capital deal by deal with average investor commitments ranging from $275,000 to $400,000. Fortress distinguishes itself by offering investors the option to receive cash proceeds rather than being forced into a private REIT, a flexibility that appeals to wealthier individuals seeking more choices in their investment strategy.