Red Fort fundraising for second fund reaches $184m

The New Delhi-based firm is expected to reach its $500m target for its second real estate opportunity fund, Red Fort India Real Estate Fund II, by the end of the year thanks to a mix of repeat investors and new capital sources.

New Delhi-based private equity real estate firm Red Fort Capital has brought the capital raised for its second opportunity fund to $184 million after holding a second closing.

According to filings made to the Securities and Exchange Commission (SEC), Red Fort has added a further $105 million in equity commitments to its Red Fort India Real Estate Fund II vehicle, following its first closing of $79 million at the end of April. The total capital raising target for the fund is $500 million and that is expected to be reached by the end of the year.

PERE understands the new capital has come in the form of a mixture of repeat commitments from the firm’s first fund, and commitments from new investors. The firm’s investor pool includes various institutions predominately from the US and Asia although some European investors are believed also to have committed capital.

According to the SEC filings, the minimum commitment level for the fund is set at $10 million although many commitments to date are understood to have been larger.

Red Fort’s successful closings follow the strong performance of its debut effort, the $400 million Red Fort India Real Estate Fund, which is currently projecting IRRs of 20 percent and an equity multiple greater than 2.2x.

Red Fort would not comment on fundraising matters or its return projections when contacted but Parry Singh, managing director did describe to PERE the firm’s investment strategy focusing on India’s affordable housing sector as opposed to its luxury residential sector, which he criticised as largely overcrowded by developers.
He said: “From our point of view the bull’s-eye of the market in India remains homes in the $40,000 to $100,000 range. That is where the centre of the demand is. Beyond that you have luxury homes and we have some in our first fund but that was unusual for us. Most of what we do is in the value area.”

Singh added that while the firm saw a number of investment opportunities in its home city of New Delhi, Mumbai, on the other hand, was facing a potential drop in valuations. He said: “Mumbai has suffered. We think prices are ready for a small correction.”

Singh said Red Fort had successfully exited more than 10,000 residential units in the last 18 months deploying an investment strategy where it invests equity in development schemes without using leverage. In the ‘harvesting stage’ of its first fund, Red Fort is using similar tactics in fund II and has already invested $100 million in two schemes. A further $100 million has been earmarked for a further two schemes.