The Rhode Island State Investment Commission voted to commit $30 million to a restaurant-focused loan fund at a meeting in July, according to recently released meeting minutes. The investment in the CapitalSpring Fund VI was recommended by Thomas Lynch, senior managing director at Cliffwater, the consulting firm that advises Rhode Island on its private equity investments.
Lynch introduced CapitalSpring Investment Partners as a niche private debt firm. He added that, for Rhode Island, this fund would be more liquid than traditional private equity, the bucket from which the state pension is allocating the money.
CapitalSpring co-founder Richard Fitzgerald and investor relations vice president Kristin Reilly further outlined the fund’s strategy to the commission at the 21 July meeting. The fund invests in branded franchise restaurants and focuses on quick service and fast-food casual restaurants, which are not as vulnerable to recessions, the CapitalSpring executives argued. Fitzgerald told the commission that
CapitalSpring is a strong option for borrowers in the restaurant industry who can’t access bank loans. He added that his firm has a team with deep industry experience and relationships with brand franchisors.
The fund is raising $500 million. It charges management fees of 1.5 percent on called capital. The performance fee is 20 percent to the general partner after the limited partners have earned a 7 percent return with a catchup provision for the general partner’s share.
CapitalSpring is based in New York and offers mezzanine debt and preferred equity investments to proven operators in the restaurant business, according to its website.
The Rhode Island State Treasury oversees about $8.3 billion in state pension assets. The fund has a 7 percent allocation to private equity, according to PDI Research & Analytics.