Oaktree Capital Management has beaten the target for its latest real estate credit vehicle after closing on more than $900 million in the first four-and-a-half months of the year.
The Los Angeles-based credit manager has rounded up $2.18 billion for its Oaktree Real Estate Debt Fund II against a $1.75 billion target, according to Securities and Exchange Commission regulatory filings made on Tuesday. The firm had closed on $1.24 billion as of 31 December, according to Oaktree’s fourth-quarter earnings results.
Its predecessor fund raised $1.11 billion.
A representative for the firm could not be reached for comment.
The fund, which will invest in value-added projects in North America and Europe, is targeting a 30-40 percent allocation both for mezzanine loans and commercial mortgage-backed securities, according to a May 2017 investor presentation from the San Diego City Employees’ Retirement System, which invested $40 million in the vehicle. It is also aiming to invest 10-20 percent of the vehicle in both commercial first mortgages and real estate-related corporate debt. Residential first mortgages and subordinated secured debt, or B-notes, may each constitute up to 5 percent of the fund.
Fund II, which will use up to 50 percent leverage, is targeting a 10 percent net return, according to the State Universities Retirement System of Illinois September meeting materials. Fund I has posted an 18.5 percent net internal rate of return and a 1.3x multiple on capital drawn, Oaktree’s fourth-quarter results showed. For Fund II, the firm is charging a management fee of 1 percent on invested capital and a 15 percent carried interest fee over a 6 percent hurdle. The vehicle’s investment period runs from March 2017 to March 2020.
Real estate debt fundraising has been robust, according to PERE data. In the first quarter, the strategy represented 29 percent of total real estate capital collected, or $7.76 billion of the $26.75 billion raised for both credit and equity investments. Those figures are a year-on-year increase, with debt making up 26.15 percent of the total raised in the first quarter of 2017, or $5.1 billion of the $19.5 billion total, PERE data showed.
For all of 2017, debt accounted for $25.8 billion out of $93 billion raised, or 27.74 percent.
Out of the $100.2 billion it oversees, Oaktree manages $8.96 billion in real estate assets. In addition to its Los Angeles headquarters, the firm has 18 offices throughout Asia, Australia, Europe, the United Arab Emirates and the US.