Oaktree closes on $2.1bn for latest RE debt fund

The Los Angeles, California-based firm is now preparing to launch its Oaktree Real Estate Opportunity Fund VIII in 2019.

Oaktree Capital Group has raised nearly $2.1 billion for its Real Estate Debt Fund II, surpassing its $1.75 billion target, according to the firm’s latest quarterly earnings report, Real Estate Capital‘s sister publication PERE reported.

PERE understands that the fund held its final close in September, aggregating an additional $500 million since the Los-Angeles-based firm reported $1.8 billion in commitments in its second-quarter earnings report. The firm held a first close for the fund in October 2016 and had raised $1.6 billion in total as of April, according to filings with the Securities and Exchange Commission.

Fund II brought in nearly twice as much capital as its predecessor in the fund series, Oaktree Real Estate Debt Fund. Fund I launched in 2013 and closed on $1.1 billion in 2015, according to PERE data. Fund I, which is now 81 percent invested, was generating a gross internal rate of return of 20.7 percent and a net IRR of 15.4 percent as of September 30, according to the firm’s third-quarter results. In comparison, Fund II, which launched in 2016, is now 47 percent invested.

Looking forward into 2019, the firm plans to launch its eighth Real Estate Opportunity Fund, chief executive Jay Wintrob said during the firm’s quarterly earnings call on Thursday. REOF VIII’s predecessor, REOF VII, launched in 2015 and closed on $2.92 billion in 2016. The seventh fund in the series is now 82 percent invested, according to the earnings report.

Oaktree’s core-plus and value-add strategy, executed through a special account, has amassed $615 million in committed capital to date but did not raise more capital during the third quarter. The deployment of capital from the separate account, which is now 87 percent invested, remained unchanged from the second quarter.

During the third quarter, the firm’s closed-end funds produced an aggregate gross return of 3 percent, according to the earnings report. The fund performance was driven by Oaktree’s real estate opportunities, distressed debt and European principal funds, which reported returns of 5 percent, 3 percent and 9 percent, respectively. Oaktree also reported $1.6 billion in commitments to closed-end real estate strategies during the period – approximately half of the total $3.4 billion in gross capital that was raised across all strategies during the third quarter.

Notable transactions during the last quarter included the sale of a seven-property Doubletree Hilton hotel portfolio to the Cyprus-based LRC Group, according to data provider Real Capital Analytics. The firm also sold a $64.9 million Las Vegas office portfolio, which was owned in a joint venture with Houston-based investment manager Hines, to Las Vegas-based Moonwater Capital in August.

Oaktree’s overall assets under management increased 2 percent during the third quarter to approximately $124 billion, driven by the $2.2 billion in new capital commitments to closed-end funds.  The firm’s current size is just slightly larger than the $122.6 billion in AUM it reported across all strategies during the same period in 2017. AUM growth was offset by the $1.5 billion distributed to closed-end fund investors and $0.9 billion in net outflows from open-ended funds, according to the third quarter earnings release. Real estate AUM accounted for $9.5 billion out of the $124 billion.