The 10 Largest North American-U.S. Real Estate Debt Funds To Close In The Last Decade
Alternative lenders have become a dominant force in the commercial real estate debt market following the financial crisis of 2008.
Their ability to quickly deploy capital and originate more creative loans with flexible underwriting standards has made them an attractive financing vehicle for borrowers, giving traditional banks — which are governed by very stringent federal regulations — a run for their money.
Pension funds, private equity firms, sovereign wealth funds and other institutional players are giving rise to the competitive real estate debt landscape. Since 2008, the number of private real estate-focused debt funds to close has nearly doubled from 39 funds raising a collective $12.5B in 2008 to 62 funds raising a total $32.3B in 2017, according to Preqin data. As of September, Preqin tracked 39 active real estate debt funds on the global market having raised $19.8B.
The following is a list of the 10 largest U.S. and North American-focused real estate debt funds to close in the past decade, aggregated largely from Preqin data:
Broad Street Real Estate Credit Partners III
Fund Size: $6.7B
Final Close Date: January 2018
Location Focus: Europe, North America
Investment banking giant Goldman Sachs has once again become a dominant player in the real estate debt market following the fallout due to its mishandling of mortgaged-backed securities leading up to the financial crisis. Goldman Sachs Merchant Banking Division has launched three Broad Street Real Estate Credit Partners funds, which provide senior loans, mezzanine debt and preferred equity. RECP III raised a whopping $6.7B at final close, focusing largely on real estate transactions in North America and Europe. The firm typically invests around 20% of its fundraising goal into the funds it manages.
PIMCO Bravo Fund II
Fund Size: $5.5B
Final Close Date: March 2014
Location Focus: U.S. and Europe
Pacific Investment Management Co. launched its second Bravo Fund targeting opportunistic, distressed and debt real estate opportunities in 2014. The multibillion-dollar fund is one of three PIMCO Bravo Funds the investment management firm has launched in its efforts to move into more lucrative markets, according to the Wall Street Journal. Bravo Fund I and II closed at $2.35B and $5.5B, respectively, and fundraising efforts are already underway for PIMCO’s third Bravo Fund, which had raised roughly $3.1B in commitments as of July 2017. That fund has a $5B cap.
Blackstone Real Estate Debt Strategies III
Fund Size: $4.5B
Final Close Date: August 2016
Location Focus: Global
Blackstone Group, one of the world’s largest investment firms and real estate managers, has become a major player in the alternative lending space in the last decade. The firm launched its first BREDS debt fund in 2008 to help fill the void left by major banks following the Great Recession. The company has acquired or issued roughly $53B in real estate loans since 2008 and said its BREDS funds generate an average 12% in net returns for investors, according to a company filing.
Broad Street Real Estate Credit Partners II
Fund Size: $4B
Final Close Date: May 2014
Location Focus: Europe, U.S.
Goldman Sachs Merchant Banking Division closed on its second Broad Street Real Estate Credit Partners fund in mid-2014 with $4B to invest, including expected leverage, the company said in a press release. Preqin data shows the firm raised nearly $2.4B from investors. The first RECP fund raised a total $3.5B in capital from institutional and private investors, and Goldman Sachs Merchant Banking Division has raised $100B through various investment funds since 1986. Through its RECP funds, the investment banking giant is able to issue loans for real estate projects ranging from $100M to $500M.
Blackstone Real Estate Debt Strategies II
Fund Size: $3.5B
Final Close Date: July 2013
Location Focus: Europe, North America, U.K., U.S.
Blackstone Real Estate Debt Strategies II is the second of three BREDS funds in Blackstone’s debt strategies and real estate investment business. Capital from BREDS II has been used to recapitalize debt and provide mezzanine loans for an array of projects. Blackstone kicked off its third BREDS fund in November 2015, committing $100M of its own capital to the fund. The fund exceeded its fundraising goal of $4B and closed at $4.5B in August 2016.
AllianceBernstein Commercial Real Estate Debt Fund III
Fund Size: $3.1B
Final Close Date: June 2018
Location Focus: U.S.
New York-based investment management and research firm AllianceBernstein raised $3.1B in commitments from mostly U.K. and European institutional investors for its third AB Commercial Real Estate Debt Fund this year. The fund provides senior mortgages for high-end commercial assets in the U.S. with a loan-to-value ratio around 70%, according to a report by IPE Real Assets. The global investment giant closed its first and second debt funds having raised $750M and $2.3B in commitments, respectively.
Brookfield Real Estate Finance V
Fund Size: $3B
Final Close Date: November 2017
Location Focus: U.S.
In November, global commercial real estate owner and operator Brookfield Property Group closed out its fifth commercial real estate finance fund, dubbed Brookfield Real Estate Finance V, after raising $3B in commitments. The fund targets mezzanine debt investments for high-quality properties in the U.S. More than 64 institutional investors, private equity and sovereign wealth funds deployed capital in the fund, which had already issued nine mezzanine loans in the amount of $422M as of November 2017, according to a company statement.
Blackstone Real Estate Special Situations Fund II
Fund Size: $2.9B
Final Close Date: February 2011
Location Focus: U.S.
Blackstone Group, which manages $119B in real estate assets worldwide, launched its second Blackstone Real Estate Special Situations Fund targeting U.S. assets in 2009. This particular fund was well-positioned to aid in the real estate market recovery following the recession, providing debt capital to recapitalize legacy assets and acquire new properties, including RLJ Development’s purchase of Doubletree Metropolitan Hotel in New York City, a refi of the Four Seasons in Miami and mezzanine debt for the recapitalization of 25 Massachusetts Ave., an office building owned by Republic Properties Corp. in Washington, D.C., the company said in a statement.
PIMCO Bravo Fund I
Fund Size: $2.4B
Final Close Date: July 2011
Location Focus: Europe, North America, U.S.
PIMCO launched its first Bravo Fund (which stands for Bank Recapitalization and Value Opportunities) in 2011, raising $2.4B to invest in debt, distressed and opportunistic real estate opportunities, according to Preqin data. According to a public memorandum, Bravo Fund I generated 22.1% in net returns through June 2017. PIMCO’s third fund is still seeking capital commitments to hit a $3B to $5B target.
Oaktree Real Estate Debt Fund II
Fund Size: $2.18B
Final Close Date: April 2018
Location Focus: Asia, Europe, Germany, Japan, North America, South Korea, U.K., U.S.
Global asset manager Oaktree Capital Management launched its second Oaktree Real Estate Debt Fund in 2017 and raised roughly $2.2B in capital commitments by April. 2018 Oaktree launched its Real Estate Debt strategy in 2010 to purchase discounted residential and commercial mortgage-backed securities it deemed toxic. While roughly 60% of the fund invests debt in U.S. assets, the remaining 40% targets assets in Asia, Europe, Germany, Japan, South Korea and the U.K. Oaktree Real Estate Debt Fund I raised $1.1B.
CORRECTION, OCT. 4, 11:12 A.M. ET: A previous version of this story incorrectly listed loans issued by Blackstone’s Real Estate Debt Strategies II fund. Those loans were actually issued by Blackstone’s Real Estate Special Situations Fund II. The story has been updated.