Connecticut earmarks $75m for RE credit fund

H/2 Capital Partners has raised $1.5bn for the value-added vehicle, which focuses on special situation credit investments in commercial real estate.

Connecticut Retirement Plans and Trust Funds is looking close to home for its latest real estate commitment, according to materials from its Wednesday meeting.

The Hartford, Connecticut-based pension system earmarked $75 million for H/2 Capital Partners’ real estate credit fund, H/2 Special Opportunities Fund IV. H/2, the Stamford, Connecticut-based real estate credit manager, has raised $1.5 billion for the vehicle, which is scheduled for a first and final close next month, according to CRPTF’s board documents.

With capital from the value-added vehicle, H/2 plans to focus on new loan origination, refinancing shortfalls from large balance single asset commercial mortgage backed securities and entity-level financings to large public companies that have difficulty securing financing because of regulatory requirements. The firm primarily invests in credit investments backed by large assets owned by institutional buyers.

The third fund in the series, which closed in 2014 on $1.3 billion, has generated a net internal rate of return of 15.6 percent as of September 30, according to CRPTF. For its fourth vehicle, H/2 is committing at least 1 percent of the fund’s capital.

Other investors in Fund IV include the Illinois State Board of Investment, which allocated $50 million; Old Dominion University, which earmarked $2 million; and the Oklahoma State Regents for Higher Education, which committed $7 million, according to the investors’ websites.

H/2 manages about $10 billion in gross assets, according to CRPTF. The firm was founded in 2004 by Spencer Haber, who was previously the chief financial officer for iStar Financial, a New York-based real estate investment firm.

CRPTF managed $2.2 billion in real estate out of its $29.3 billion overall portfolio as of June 30, according to its most recent investment report. The pension system’s real estate portfolio returned 11.5 percent in the fiscal year that ended June 30, just below its 11.8 percent benchmark. The fund overall generated a 0.4 percent return in the same period.

In April’s meeting, CRPTF committed $150 million to real estate, writing a $50 million check to Blackstone for the firm’s fifth European fund and a $100 million check to Starwood Capital Group for its eleventh opportunistic vehicle, PERE previously reported.