Colony NorthStar has collected a total of $1.3 billion for its fourth real estate debt fund, Colony Distressed Credit & Special Situations Fund IV, PDI’s sister title PERE has learned.
According to multiple sources familiar with the fund, the final close occurred at the end of March but was not previously reported. CDCF IV represents Colony NorthStar’s largest real estate debt vehicle to date and the first fund it raised as a public company, following the April 2015 merger of Colony Capital, one of the predecessor entities of Colony NorthStar, with its publicly-traded mortgage real estate investment trust, Colony Financial.
However, CDCF’s total equity haul fell far short of its original $2.5 billion equity goal, which was understood to be a reflection of the firm’s anticipated deployment pace in real estate debt over the next several years.
The firm, led by executive chairman Thomas Barrack, began marketing CDCF IV in 2015 and raised more than $700 million in its first close in December 2015. Limited partners have included the Florida State Board of Administration, which agreed to invest $150 million in February 2016; Teachers Retirement System of Louisiana, which committed $75 million in September 2015; Kern County Employees’ Retirement Association, which earmarked $60 million in November 2015; as well as Seoul’s IGIS Asset Management Company and an Asian bank, according to various public documents. Colony declined to comment.
To date, Colony NorthStar has invested or committed 80 percent, or $900 million, of the fund’s capital. Similar to its predecessors in the fund series, CDCF IV will be focused on loan acquisitions, high-yield originations and special situations. CDCF IV will have a 60 percent allocation target to Europe, compared with 40 percent for CDCF III, which collected a total of $1.2 billion in October 2014.
CDCF III was generating a net internal rate of return of 10.3 percent and a total value multiple of 1.14x as of September 30, while CDCF IV, still early in its life, had an undisclosed net IRR and a multiple of 1 percent, according to a third-quarter performance report from Florida SBA, its most recent available.
Colony NorthStar raised approximately $980 million of third-party capital during the first quarter and is targeting more than $2 billion of third-party fundraising this year from retail and institutional investors, according to a May investors presentation. The firm had $56 billion of assets under management as of March 31.