Chicago-based private equity real estate firm Walton Street Capital has raised its first capital for its debut debt fund, Walton Street Real Estate Debt Fund.
The firm raised $120 million from three investors at the first close, including a $100 million seed commitment from pension plan Texas Municipal Retirement System, as previously reported.
A second closing is anticipated within the next three to four months as it seeks to hit its overall $500 million fundraising target.
According to filings with the US Securities and Exchange Commission (SEC), Walton Street is being assisted with its fundraising by placement agency Pacific Capital Partners.
Neither firm would comment.
Walton Street’s fund aimsto capitalize on the strong demand for real estate debt generally in the US and will lend to borrowers that need to supplement loans of about 55 percent loan to value where they need further gap financing to complete transactions
The fund will be invested in whole loans, mortgage participations and mezzanine loans backed by real estate and other real estate-related assets in the US.
The firm will structure junior loans by originating whole loans and selling the senior loan to a network of relationship banks while holding onto the junior portion.
A key feature of the firm’s strategy for the fund is the exclusion of any recourse borrowing at the fund level – many US debt funds use gearing at the fund level to build bigger portfolios. Typical loans offered are expected to have three to five year maturities.
To date, Walton Street has originated $150 million of whole loans for the fund, selling on the senior tranches.
The firm is aiming to provide investors a net return of 9 percent to 11 percent.