Walton Street closes $654m RE debt fund – Exclusive

The Chicago-based private equity real estate firm surpassed its target for its first dedicated real estate debt vehicle.

Walton Street Capital has held the final closing for its first dedicated real estate debt fund, Walton Street Real Estate Debt (WSRED). The Chicago-based private equity real estate firm collected a total of $654 million for the vehicle, beating its original $500 million target.

Walton Street captured $120 million during the fund's first close in September 2014, PERE reported at the time. As of September 2015, the firm had raised $320 million for the fund, according to a filing with the US Securities and Exchange Commission. Texas Municipal Retirement System (TMRS), which committed $100 million to the fund in March 2014, was an early investor in the fund.

Other limited partners included government pension funds, insurance companies, asset managers, banks, family offices and high-net-worth investors from the US, EMEA, Asia Pacific and Latin America.  The US and EMEA accounted for the largest percentages of the fund's investor base.

WSRED's core-plus strategy is focused on the origination and structuring of floating-rate debt investments secured by current income-generating assets in major US markets. The fund has a net return target of 9 percent to 11 percent, according to a 2014 TMRS document.

Equity commitments from the fund are expected to range in size from $10 million to $50 million, with an average of $10 million to $20 million for each loan.  Targeted whole loan sizes will vary based on the underlying asset and opportunity but typically will range from $50 million to $100 million.

“We are pleased to successfully complete the marketing of WSRED, well exceeding our target raise,” said Jay Weaver, a co-founder and managing principal of Walton Street. “We appreciate our investment partners' commitment to our debt investment strategy.”

Walton Street has committed to date more than $220 million, or approximately one-third, of the fund to investments in office, retail and hotel assets in core markets including Los Angeles/Orange County, Washington DC/Northern Virginia, Chicago, Dallas, Minneapolis and Kona, Hawaii.

“We are excited about the lending opportunities for WSRED given the favorable dynamics of the credit markets for high-quality commercial real estate and the attractive risk adjusted returns achievable in WSRED's investment sector,” added senior principal Richard Ratke.

Pacific Capital acted as placement agent for the fund.