Golden Gate Spin-Out Raising First Fund

Executives at Sycamore Partners, the firm started by two former professionals at Golden Gate Capital, are stepping up their fundraising campaign, according to three sources who put the expected size at anywhere from $500 million to $1.5 billion.

Stefan Kaluzny, a managing director, left San Francisco-based Golden Gate earlier this year after 10 years with the firm, reportedly bringing with him Peter Morrow, a principal.

Two sources believe Sycamore is seeking to raise upwards of $1 billion to $1.5 billion for their debut fund. One of these sources told Buyouts that he’d seen a letter Kaluzny sent to potential investors that said the firm hoped to hold a first close on June 27, although it’s unclear if that ever happened. This source also said that in the letter, Sycamore had offered to drop its management fee to 2 percent from 2.5 percent, suggesting Sycamore has had to make some concessions on terms to attract interest, a common theme in today’s difficult fundraising market.

A third source said Sycamore has held a first close of around $300 million to $400 million, and was seeking to raise between $750 million and $1 billion. This source also confirmed that Sycamore had lowered its management fee to 2 percent from 2.5 percent.

Kaluzny did not return calls to his cell phone seeking comment.

New York-based Sycamore operates a barebones one-page Web site describing itself as a mid-market firm whose strategy is “to partner with management teams to improve the operating profitability and strategic value of their business.” There are no links, except for an e-mail address for general inquiries. The firm is expected to target deals in the retail and consumer products sectors, which Kaluzny specializes in.

It’s unclear if Kaluzny and Morrow’s departure from Golden Gate, which reportedly was not very amicable, is impacting the fundraise. The pair told Golden Gate they were leaving only a day before they did so, according to trade newsletter Asset-Backed Alert.

Kaluzny still sits on the board of directors of some Golden Gate portfolio companies, including jewelry retailer Zale Corp. and clothing retailer Express Inc., for which he is chairman of the board. He also serves on the Yale University investment committee, according to his biography on Zale’s Web site.