Madison Realty garners $1.15bn for Debt Fund IV – exclusive

New York-based firm secures its first Asian institutional capital, exceeding hard-cap of $1bn

Madison Realty Capital has raised $1.15 billion for its fourth US commercial real estate loan fund, an industry source confirmed to PDI.

An Asian insurance company last month committed $45 million to Madison Debt Fund IV. It is understood that with the most recent commitment, the firm’s latest closed-end fund will hold a final close shortly.

The fund was launched in June 2017 and is backed by at least 104 investors.

According to a fund term sheet seen by PDI, Fund IV focuses on originating and acquiring commercial real estate loans across the capital structure. It has a four-year investment period within a six-year fund life. The fund series can employ fund level leverage up to an aggregate debt-to-equity ratio of 1:1.

Among the existing investors to the fund, the Texas Municipal Retirement System disclosed a $100 million commitment, as per a document released on 25 October 2017.

The term sheet says Fund IV is targeting a 16 percent net IRR. However, the firm had disclosed in 2017 that the fund was targeting a net IRR of 11-14 percent and a multiple of invested capital of between 1.4x and 1.7x.

Gibson, Dunn & Crutcher is acting as fund counsel. The Los Angeles-based law firm advised on a $75 million credit transaction for Madison Realty, as disclosed in 2017.

As PDI reported in February, Fund IV was expected to raise a significantly larger amount of capital than its predecessor, Madison Realty Capital Debt Fund III, which held a final close on $695 million in May 2016. Oregon State Treasury disclosed a $150 million commitment to Fund III. New York State Teachers’ Retirement System also committed $40 million to the vehicle.

Fund III’s investors as of the end of March also included other public pension funds, foundations, endowments, family offices, wealth managers based in the US, and one insurer based in Asia.

Madison Capital Realty did not respond to PDI’s requests for comments.

The firm managed $4 billion as of January and has invested more than $9 billion in both debt and equity transactions since its inception. In March, it disclosed that it had loaned $138 million for the construction of a mixed-use property development in New York.