Angel Oak raises almost $300m for first RE debt vehicle

The firm is the latest in a spate of real estate managers to venture into the debt world.

Angel Oak Capital Advisors has launched its first private real estate debt fund, closing above its $250 million target, the Atlanta-based firm said in a statement.

The debut vehicle, Angel Oak Real Estate Investment Fund I, closed on $291 million and will invest primarily in non-qualified mortgages, which the firm said allows “creditworthy borrowers” that haven’t obtained funding from traditional sources to access a mortgage.

“More and more, we’ve seen institutional investors recognize the growth potential for non-bank lending,” said Sreeni Prabhu, Angel Oak’s co-chief executive and chief investment officer. Angel Oak, which specialises in mortgage-backed securities, forecasts that real estate-related credit, particularly residential real estate, will perform better than other credit types.

The firm declined to comment further.

Just as private equity firms have ventured into private credit as a means to diversify their product offering, private equity real estate managers have ventured into debt as well. Amundi Group, a French manager, announced plans for a real estate debt fund, which is seeking €500 million to deploy through senior lending in club deals or participations in the syndication market, as Private Debt Investor previously reported.

One source told PDI sister publication PERE a debt product is a “must-have”, as investors perceive debt to be safer than straight equity since lenders are above equity holders in the repayment pecking order.

Brookfield Asset Management took the top prize last year for 2017’s largest real estate debt fund, Brookfield Real Estate Finance V, closing on a massive $3 billion. The vehicle drew in 60 investors, including the New York State Teachers’ Retirement System and the Kentucky Retirement Systems in the US and the KB Insurance and Lotte Insurance in South Korea. The firm’s previous real estate debt vehicle raised $1.5 billion.

Alongside real estate vehicles, Angel Oak offer mutual fund products, an interval fund, a strategic credit fund and a high yield opportunities fund, among other investment platforms.