JPMorgan Chase & Co. (JPM:US) invested as much as $110 million as initial capital in its Junius Real Estate Partners fund after the venture failed to raise money from investors, the Wall Street Journal reported.
The fund is developing properties with a total value of about $465 million, including a shopping mall in Chicago and hotels in Ohio, the newspaper said, citing people it didn’t name. Junius plans to raise funds from outside investors to take over the bank’s position, the Journal said, citing people who have been briefed on the matter.
The investment may not comply with the so-called Volcker rule, which bans banks from proprietary trading, the newspaper said, citing lawyers. The rule prohibits banks from supplying more than 3 percent of firm money into their own funds, the newspaper said. The Volcker rule may not apply in this instance as Junius isn’t operating a closed-end property fund, it said.
Joseph Evangelisti, a JPMorgan spokesman, didn’t return an e-mail seeking comment. A spokeswoman who wasn’t named declined to comment on how the bank will comply with the rule, the Journal reported.
The largest U.S. bank by assets has lost at least $2 billion on derivative trades. Chief Executive Officer Jamie Dimon, who testified about the losses before Congress this month and said traders didn’t fully understand the risks, has been a critic of the Volcker rule.
Junius doesn’t plan to use more than $300 million of capital a year from the bank, the Journal said, citing people it didn’t name who have been in discussions with the fund’s executives. The initial investment was from $100 million to $110 million, according to the newspaper.
The real estate fund had initially planned to raise $750 million, with JPMorgan contributing 3 percent of the total capital, the newspaper said, citing investors it didn’t name.
To contact the reporter on this story: Nathaniel Espino in Beijing at firstname.lastname@example.org
To contact the editor responsible for this story: Chitra Somayaji at email@example.com