Madison Realty Capital Closes $2B Debt Fund
This is the largest U.S.-focused real estate debt fund to close so far this year.
Madison Realty Capital has closed the Madison Realty Capital Debt Fund VI LP with a total just north of $2 billion in equity commitments two years after it was launched. The private equity firm notes that the fund is the largest U.S.-focused real estate debt fund raised so far in 2024 and the second-largest real estate debt fund raised overall this year.
Institutional investors worldwide ponied up for the fund with the firm managing to expand its investor base in Asia. Many of Fund VI’s backers, nearly 70 percent, were existing Madison investors.
Thus far the fund has completed nearly $3.8 billion in 26 national metro market transactions. Considering leverage and other factors, Fund VI will be able to invest between $6 billion and $8 billion of total commitments, according to Madison.
The fund focuses on the origination and acquisition of loans in major U.S. metros with an emphasis on multifamily and other residential-related properties. It also keeps an eye out for a variety of other opportunistic plays, such as in hotels, student housing, land, industrial, retail or office.
The demand is out there, Madison Realty Capital Managing Principal Josh Zegen said, including new and existing borrowers looking for private credit relatively quickly.
New York-based Madison now manages over $21 billion in asset, and has executed about $48 billion in transactions since inception.
Banks’ CRE woes fuel alternative financing
The current state of the debt and capital markets for CRE is still uncertain and banks have taken a collective hit when due to declines in real estate values. Some banks will be able to spread out these write-offs, but others will likely fail, according to 2024 CBRE Capital Markets Outlook.
The upshot is extreme caution when it comes to bank lending, especially when it is associated with office properties, particularly non-Class A assets. Thus an opportunity for other kinds of lenders opens up, since demand isn’t dead, or even that sickly.
Multifamily and industrial assets will be most favored by investors in 2024, notes CBRE. Both property types have relatively strong fundamentals and “long-term tailwinds that bolster their attractiveness,” the company explains.
