New York-based real estate private equity manager Asia Capital Real Estate has raised more than $325 million for its first debt fund, surpassing its $300 million target for the multifamily-focused ACRE Credit I, Real Estate Capital can reveal.
The fund – which originates first mortgage bridge loans, mezzanine loans and preferred equity on high-quality properties across the US – is the firm’s first discretionary debt vehicle and complements ACRE’s three existing equity funds, according to managing partner Michael Van Der Poel.
“We had originated $300 million of loans before we launched our first debt fund and built out the vertical with a team and a track record,” he told Real Estate Capital. “We had been executing loans on a deal-by-deal basis and believed that it was time to have a discretionary fund.”
Fundraising through the pandemic
ACRE launched the fund at the start of 2020, beginning fundraising just before widespread shutdowns stemming from the covid-19 pandemic. But the company believed that the groundwork that it laid in the debt sector prior to launch would help in the fundraising process, particularly because there was an urgent need from sponsors for liquidity.
The situation led ACRE to hire Baird, a Milwaukee, Wisconsin-based investment bank, to find an anchor investor. The firm ultimately formed a partnership with Almanac Realty Investors, an affiliate of investment manager Neuberger Berman. Almanac made a $320 million commitment to ACRE’s fund strategies, a substantial chunk of which was allocated to ACRE Credit I.
“The pandemic almost shut down fundraising, but we knew that this was counterintuitive to the deals we were seeing. Debt funds and other lenders had stepped back from the market,” Van Der Poel said. “We used our existing portfolio to find a strategic partner and the partnership allowed us to keep lending during the pandemic.”
With Almanac in place, the firm found that clients and prospects were interested in its strategy for two reasons: the surge in interest in the multifamily sector and a greater need for stable income-producing strategies in today’s low-interest-rate environment, according to Van Der Poel.
“Additionally, we had a pool of loans pre-funded, and investors got a unique opportunity to get into a large pool of loans that were producing double-digit returns,” he added. “We were able to help borrowers with liquidity needs and this portfolio of existing loans helped investors to understand our strategy.”
Through the fund, ACRE can originate loans across any property in the single-family or multifamily space, targeting opportunities of $15 million to $20 million on the lower end and $100 million or more on the higher. It will consider single assets as well as larger properties and has already provided more than $700 million of loans since the fund’s launch. Loans originated support the acquisition, lease-up, redevelopment and recapitalisation of multifamily assets in growing secondary markets such as Miami, Durham, Cincinnati, Orlando, Charleston and Dallas.
“Almost all of the loans we have originated have been senior secured first mortgage bridge loans with repeat borrowers who are quasi-institutional sponsors and sophisticated users of capital,” Van Der Poel said, adding that the company can also provide senior and mezzanine debt at the same time.
With the fund, ACRE has been able to diversify its investor base away from family offices. The fund has more than 75 investors, with a large portion being family office clients, according to Van Der Poel.
“We added a few more institutional investors to the fund,” he said, adding that this will be a continued focus going forward. “One of our goals for the future is to increase our dialogue with institutional allocators, and our relationship with Neuberger and Almanac is helping with that.”
ACRE, via a series of equity and debt funds, manages more than $1.8 billion in assets across private real estate investments and loans.
“We will be investing more in multifamily, single-family, build-to-rent and anything else that is essentially US housing related,” Van Der Poel said. “And as soon as we’ve invested our credit fund, we’ll launch a second fund.”