Invesco RE debt-equity fund locks down at least $205m toward $500m goal

Debt fundraising stumbled last year, decreasing by almost 50% from 2017, according to data from a PDI sister publication.

Invesco Real Estate has raised at least $205 million for a hybrid real estate debt-equity fund that would deploy capital onto both sides of the Atlantic.

The New York-based investment behemoth is seeking $500 million for Invesco Strategic Opportunities Fund III, which would invest in distressed real estate throughout the capital structure, according to the Oklahoma Teachers’ Retirement System June meeting materials. The fund has a hard-cap of $650 million and held a first close on $150 million in May.

Invesco declined to comment.

The vehicle, which will be approximately 60 percent invested in Europe and 40 percent in the US, will target a 14-16 percent net internal rate of return, the TRS documents showed. Investments will be made in office, multifamily, industrial, hotels and for-sale residential properties.

The fund’s management fee is 1.5 percent on invested capital and lists a 20 percent carried interest fee over a 9 percent hurdle rate. The vehicle, which has a seven-year life, has a three-year investment period that begins upon a final closing, which is slated to take place in May, the Oklahoma pension fund papers showed.

Real estate debt fundraising, while robust in recent years, took a steep nosedive last year, according to data from Private Debt Investor sister publication PERE. The strategy saw a 48 percent decline from 2017 to 2018, falling from $39.08 billion to $20.39 billion.

As a niche strategy, real estate debt likely also faces more limited demand from investors, Kelly DePonte, a managing director at placement agency Probitas Partners, told PERE. “Many LPs only make commitments to very few funds as their core investments in that niche – once they are satisfied, they are often more focused on re-ups than backing new managers,” he explained.