Commercial real estate finance specialist Mesa West Capital is targeting a second quarter final close for its Real Estate Income Fund III, according to San Diego City Employees’ Retirement System documents.
The final close will likely exceed the fund’s $650 million target, according to a market source. The vehicle held a first close on $379.2 million in November, according to US Securities and Exchange Commission documents. Mesa West set a $850 million hard-cap for the vehicle.
Real Estate Income Fund III will originate bridge financing for mid-market transitional and value-add properties in the US, according to Mesa West presentation materials made available by the retirement system. The vehicle will provide floating rate loans on a 65 percent to 70 percent loan to asset value basis.
Fund terms limit portfolio level financing to a 4:1 ratio, according to the materials, and “the fund will bear all organizational and offering expenses, up to $1 million incurred in the formation of the fund”.
SDCERS is considering a $20 million commitment to the vehicle through the $40 million allocation to non-core real estate strategies set by the retirement system’s 2013 real estate investment plan.
“The fund presents a compelling strategy for investors to access the institutional real estate debt markets that have long been dominated by banks and life companies,” according to a Hewitt Ennis Knupp commitment recommendation. “The strategy is also timely given the current funding gap for transitional / value-added properties.”
Mesa West Real Estate Income Fund II was 80 percent invested as of 11 December, according to Los Angeles City Employees’ Retirement System documents. The vehicle had generated a projected net internal rate of return of 15 percent and 1.17x equity multiple since inception as of 30 June.
Mesa West maintains offices in Los Angeles and New York. The firm specialises in providing capital for real estate acquisitions, refinancings and recapitalisations, according to its website.