Real estate private equity firm Madison Realty Capital has completed the first closing of its third debt fund, Madison Realty Capital Debt Fund III, raising $145.4m of capital commitments.
Commencing 23 July for an 18-month raise, the firm is calling upon investors including public and corporate pension funds, university endowments, family offices, and wealth managers for commitments.
All of the limited partners in the first closing had invested in previous MRC debt funds, or were LPs in equity acquisition and development deals, said Adam Tantleff, managing principal of MRC.
“We’ve really carved out a niche for ourselves by institutionalizing the middle-market, which has historically been a non-institutionalized space,” he said. “A lot of our LPs are very large public, corporate or sovereign wealth companies that, because of their size, were always prohibited from investing in the middle marketplace.”
The fund is targeting $600m in total commitments and will originate and acquire commercial mortgage loans, mezzanine loans and preferred equity interests in real property. The firm will look to originate or purchase loans up to $100m, and initial investments will be geared towards senior bridge loans.
Underlying assets will span multifamily, industrial, office and retail, mainly across the East Coast, as well as opportunistic hotel deals in New York. The fund has the ability to employ up to 50 percent leverage, allowing for as much as $1.2bn in investments; and the firm will target loan coupons ranging from 8% to 13%, LTVs up to 75 percent and one- to three-year terms.
“We take advantage of market inefficiencies, where you’re getting paid significantly above market returns versus the risk you’re taking,” Tantleff said. “At the end of the day, you’re getting equity-like returns.”
In September the firm held the final closing of Sullivan Debt Fund, its second debt fund, with $350.4m in capital commitments.
Founded in 2004, MRC specializes in debt and equity financing solutions for middle-market transactions. The firm has completed $2.5bn in transactions, with $2bn of that going to debt investments, Tantleff said. Its platform encompasses origination, servicing, asset management, property management, and construction management.