Torchlight collecting cash for sixth fund

Thirty percent is the maximum leverage level the firm will apply to the vehicle, which aims to provide an a 6 percent or higher annualised distribution rate when fully invested.    

Torchlight Investors is back in market with its sixth flagship fund, for which it will seek a 12-15 percent net internal rate of return, according to a southern California pension fund’s meeting documents.

The New York-based real estate lender is seeking capital for Torchlight Debt Opportunity Fund VI to invest in senior and mezzanine commercial real estate loans along with commercial mortgage-backed securities, among other real estate-related debt.

For its senior strategy, Torchlight’s senior investments, which the firm provides when it is also the subordinated lender, can be levered up to 70-75 percent loan-to-value ratio and is a three- to five-year floating rate loan with flexible prepayment provisions, according to its website. Requirements for investments in mezzanine loans and preferred equity include a loan size of at least $10 million with a three- to 10-year term that can be levered up to 95 percent loan-to-cost ratio.

The documents, from the San Diego City Employees’ Retirement System, did not specify a target for the fund, and a Torchlight representative could not be reached for comment. SDCERS committed $20 million to the vehicle, according to a summary of the investment committee meeting earlier this month. The Employees’ Retirement System of the State of Hawaii (ERS) also reportedly committed $50 million to the vehicle.

Fund VI will utilise a maximum of 30 percent leverage, which the firm maintains in its documents is less than the 60 percent that some real estate funds use. In addition to the net IRR goals, the vehicle seeks an annual distribution of 6 percent or more when the fund is fully invested.

Fund V raised $1.36 billion, to which SDCERS also pledged $20 million. Additional limited partners for that fund included the South Carolina Retirement System (a $100 million commitment), the Contra Costa County Employees’ Retirement Association ($75 million), and the Nebraska Investment Council and Hawaii ERS (each $40 million). Fund IV raised $941.6 million, according to PDI data. Both vehicles are slated to meet their return targets, the SDCERS documents showed.