Madison Realty holds first close for its newest debt fund

The New York-based real estate equity and debt firm has raised $145 million for the first close of its third real estate debt fund.

Madison Realty Capital, the New York-based private equity real estate firm, is holding a first close of its third real estate debt fund at $145.4 million. The firm has a $600 million target for the fund and expects to hold several closings before it reaches the final mark. The first commitments came from a mix of investors, including public and corporate pension funds, university endowments, family offices and wealth management firms. All were investors in the firm’s previous funds.

According to previously published reports, the Texas Permanent School Fund is one recent investor in a previous fund, the Madison Realty Capital Sullivan Debt Fund, a mezzanine lending fund focused on special situation loans, including first mortgages, and distressed debt. 

The new fund, which is called the Madison Realty Capital Debt Fund III, is the firm’s third real estate debt fund. It will originate and acquire commercial mortgage loans, mezzanine loans and preferred equity interests in real property, and may employ up to 50 percent leverage in the portfolio. This fund has a broader mandate than the previous ones. Madison Realty’s first fund was an open-end fund that raised $300 million between 2005 and 2008. It’s in the process of winding down now and should return all capital by the end of the year. The second fund had a $300 million target. It raised over $350 million between 2011 and 2013 and is being invested now. It has a four-year investment time horizon.

As the firm launched more debt funds, they expanded in their scope. The first fund was strictly a lending fund, whereas the second one dealt with lending and distressed debt. The third fund is going to bring together the firm’s equity and debt investing expertise and expand the investment landscape even further.

“All of the limited partners in the first closing of MRC Fund III have been investors in our previous debt funds, or invested as LPs in our equity acquisition and development deals,” said Managing Member Adam Tantleff, in a news release.  “Our fully-integrated real estate platform has been successful in maintaining the volume and quality of middle-market investment opportunities, and the performance of MRC’s portfolio has helped MRC continue to build on its loyal investor network.”

Madison Realty Capital was launched 10 years ago as an institutionally-backed real estate private equity firm focused on real estate equity and debt investments in middle market companies. Since its founding, MRC has invested approximately $2.5 billion in the multifamily, retail, office and industrial sectors.