Red Oak Capital Fund is looking to raise $30 million for a commercial real estate debt fund focused on “efficient” hard money lending.
The loans will typically have a one year duration with six-month extension options, ranging in size between $500,000 and $5 million. The fund will target returns between 10-12 percent and have a likely life cycle between 4-6 years. And the firm expects to turn deals around in no longer than 28 days.
The short-term transitional debt is not typically serviced by traditional institutional lenders; and the smaller deals, averaging $1.5 million, evade bigger funds, Joe Elias, senior director with Red Oak, told Real Estate Capital.
“Part of the strategy behind building this fund is being efficient with that turnaround time,” he said. “There’s a lot of money already in circulation but there’s still a lot of people looking for money. There are a lot of developers who are looking for that efficiency and as a result we are looking at new deals every day.”
He added: “We are looking to raise much larger amounts in the subsequent funds, but we want to test out this model of efficient underwriting.”
The company will target a variety of multifamily, retail/shopping, office, hotels and redevelopment/rehab projects focused on primary US markets with strong upside potential.
“These are real estate projects that make good sense on paper” added Chip Cummings, another Red Oak senior director, in a prepared statement. “By focusing on the underlying debt instruments, and not owning and managing the real estate itself, we are able to mitigate much of the risk and produce stronger returns for our investors.”