Mesa West Capital has closed its fourth debt fund on $900 million, the firm said Wednesday.
The Los Angeles-based real estate debt fund manager launched Mesa West Real Estate Income Fund IV in July 2015 with a $750 million target and a $900 million hard-cap. Through its fund series and separate accounts, the firm originates fixed and floating-rate loans for core, core-plus and value-add US properties.
The firm’s investor base comprises public and corporate pension funds, sovereign wealth funds, insurance companies, foundations and endowments, according to Wednesday’s statement. About 80 percent of the investors in Fund IV have invested in one or more of Mesa West’s previous funds. Investors in the latest vehicle include Texas School Permanent Fund, Indiana Public Retirement System and San Joaquin County Employees' Retirement Association (SJCERA), which all earmarked $75 million, according to PERE data.
Fund IV has a net internal rate of return target of between 9 percent and 11 percent, according to SJCERA’s meeting minutes. With capital from the fund, the firm plans to originate first mortgage loans on institutional-quality assets, with a 65 percent to 70 percent loan-to-value ratio. Mesa West committed $5 million to the vehicle, according to SJCERA.
“Our investors understand that they can often achieve better going-in yield and average cash-on-cash returns by lending on high-quality assets than they can by buying them, while at the same time being in the most senior position of the capital stack, which is especially important in today’s low cap-rate environment,” Ryan Krauch, a principal at the firm, said in Wednesday’s statement.
Mesa West closed Fund III in November 2013 on $752 million. The firm targeted 12 percent net returns for the vehicle, PERE previously reported.
Last month, Mesa West Capital originated a $69.1 million, five-year loan on behalf of Fund IV for a joint venture led by ColRich Multifamily. The joint venture purchased Cobblegate at Quarry Bend, a 416-unit multifamily property in Sandy, Utah, for $93.9 million, according to Mesa West.