White Oak Capital Holdings in Bloomfield Hills, doing business as Oak Real Estate Partners, a national fund manager focused on the institutional investment sector, announced it has launched Oak Institutional Credit Solutions, a $500-million private real estate financing investment fund.
The newly formed investment vehicle is the company’s first fund created specifically to serve the foundation and endowment investor class, though its affiliate company, Red Oak Capital Holdings, which has previously delivered seven funds to the retail investor class. The latest fund is formed as a nonpublic offering under Rule 506(c) of Regulation D, which only permits investment from accredited investors.
“The Fund will be focused on assets diversified across U.S. geographical regions and asset classes, to ensure effective portfolio diversification,” says Gary Bechtel, managing principal and CEO of Oak Real Estate Partners. “The loans will be based on a property’s current and future value, with pricing based on the level of risk involved, with higher-risk projects’ carrying a higher interest rate and under typically more structured terms.
“Bridge loans are a compelling financing vehicle compared to other financing options, especially in situations where a property has below market occupancy rates, the borrower’s credit profile needs improvement and/or the borrower has an opportunity and needs to close in faster timeframe than possible with other traditional lenders.”
Oak Real Estate Partners’ strategy will be to deliver a leveraged investment solution that is designed to align and support institutional investment objectives. The investment objective is to deliver an alternative return stream that enhances diversification, risk efficiency, and is uncorrelated to broader financial markets.
The firm seeks to accomplish this by capitalizing on significant investment opportunities that exist in a highly fragmented, inefficient, and underserved small- to mid-balance lending market. The strategy focuses on balance sheet credit lending that targets short-duration commercial mortgage assets collateralized and secured in the first lien position by high-quality income producing properties.
Oak Institutional Credit Solutions is a perpetual term fund and seeks to raise $200 million from a select group of foundations, endowments, and multifamily offices and will seek to leverage by another $300 million.
In addition, Oak Institutional GP, the managing member will make a commitment of at least $2.5 million, exclusive of the capital commitments. The fund’s objective is to achieve average annual preferred returns of 6 percent, with follow-on waterfall economics further outlined in the offering.
“The strategy with this new fund is to provide private debt financing to owners of commercial real estate on a nationwide basis,” says Raymond Davis, managing principal and CSO at Oak Real Estate Partner. “The company seeks to utilize the strong characteristics of its assets, favorable industry dynamics and the significant expertise and experience of the company’s senior management team to provide investment opportunities to the institutional investor sector.”
The fund will specialize in providing commercial real estate backed senior mortgage bridge loans, which are customized loans that provide short-term financing for the purchase, rehabilitation, repositioning, and retenanting of commercial real estate. In addition to funding renovations and upgrades, the bridge loans may be offered to borrowers who cannot initially qualify for permanent financing from conventional lenders
The fund is expected to include roughly 50 to 100 assets at any time when fully deployed, providing significant diversification for investors across geography, industry, tenant mix, structure type and property type. The Fund targets loans on multifamily, retail, office, industrial, mixed-use, hospitality, and other properties located in primary, secondary, and select tertiary markets within the U.S.
