Tricon Capital Group has closed on an additional $135 million for its latest US distressed real estate fund, Tricon XI, bringing the vehicle’s overall equity haul to $260 million. The second closing, combined with a $50 million separate account launched in August, brings the Toronto-based real estate investment firm’s assets under management to more than $1.5 billion.
Tricon launched Fund XI, which is targeting $300 million in equity, in 2012 to capitalize on opportunities in distressed residential real estate that have arisen out of the credit market crisis and economic recession. The value-added vehicle held a first close on $125 million in September 2012.
Fund XI provides financing to developers for the acquisition, repositioning and development of properties in the for-sale residential sector in northern and southern California, south Florida, Phoenix, Dallas, Houston and Atlanta. The vehicle is targeting a gross internal rate of return of 18 percent and expects investments to range in size from $10 million to $50 million. The fund has until December 3 to hold its final close.
“Despite what remains a challenging fundraising market, institutional investors continue to show their confidence in Tricon and its time-tested investment strategy in US residential land,” said David Berman, chairman and chief executive officer, in a statement. “With a robust pipeline of upcoming fund investments and other separate account transactions expected to close over the balance of the year, we believe our core asset management business easily will achieve its strongest year in the company’s history.”
To date, Tricon has put approximately $125 million of the fund’s capital to work in six transactions, including an $18 million commitment announced yesterday as part of a $67.5 million joint venture with Shea Homes to develop a 358-acre Phoenix site. The firm has plans for future deals in major markets in the Southeast and Southwest regions of the US and expects to invest the majority of the vehicle’s capital by the end of 2013.
In August, Tricon announced the formation of a $50 million separate account with an undisclosed institutional investor for the acquisition and development of a 1,250-acre master-planned community in Houston. The transaction, along with Fund XI’s latest close, has helped the firm’s AUM increase by 37 percent since December 31.