Mesa West Capital has raised $1.37 billion for Mesa West Real Estate Income Fund V, surpassing a $1 billion target for the first vehicle it has closed since its 2018 acquisition by Morgan Stanley Investment Management.
The Los Angeles-based private US real estate credit arm of MSIM closed the fund on February 13 with commitments from domestic and international public and private pension funds, insurance companies and individual investors, according to the firm. The fund’s size also surpasses its predecessor vehicle, Mesa West Real Estate Income Fund IV.
Fund V was launched in December 2020, with data from affiliate title PERE detailing activity that included commitments of $80 million and $20 million from Los Angeles Water & Power Employees Retirement Plan as well as a $40 million commitment from Arkansas Teachers Retirement System, among others. The Los Angeles pension was also an investor in the three most recent predecessors of the Mesa West Real Estate Income Fund.
The vehicle will aim to originate, purchase and manage loans secured by value-add and transitional US commercial real estate assets at a time when dislocation and volatile market conditions are presenting new opportunities to those with mobile capital available.
“In today’s environment, sophisticated investors are increasing their allocations to real estate credit with managers who have been tested through market cycles,” said Jeff Friedman, principal at Mesa West.
A Mesa West spokesperson said the firm expects the market shift and lack of attractive debt capital to create a lender-favorable environment, allowing Mesa West to originate loans with wider spreads at more attractive leverage points than in years prior. “As the first successor fundraise as part of Morgan Stanley Investment Management, investors value our ability to leverage the broader Morgan Stanley resources and network, and we also benefited from the expanded marketing effort from the wider platform,” the spokesperson said.
Fund V is approximately 25 percent invested at present with ample dry powder still on deck. “We intend to focus on financing high-quality real estate through acquisitions at re-set values, recapitalizing existing debt stacks on assets that need more time to stabilize, purchasing performing loans at a discount and pursuing other strategies to provide liquidity to the sector, while continuing to lend to institutional sponsors, at moderate leverage, and on core infill real estate,” the spokesperson said.
John Klopp, global head of real assets at MSIM, said Fund V’s capital raise builds on the firm’s growing real assets platform, which currently manages $62 billion in assets. “The strong investor demand for this fund underscores our continued focus on providing best-in-class private and listed real assets solutions across multiple equity and credit strategies to meet our clients’ objectives,” he said.
Mesa West has been dialing up its focus on originating more multifamily financing in the Sunbelt and beyond since it first signaled its efforts to pivot toward the sector in 2021.
In May 2022, Mesa West executive director Matt Snyder told Real Estate Capital USA the private lender had largely been tracking where broader real estate equity investors were angling in order to hone in on its own multifamily and industrial opportunities where rent and valuation growth was holding steady.
Mesa West funded a $108 million loan for a Phoenix multifamily asset acquisition in July and $140 million loan for a Denver multifamily community purchase and renovation in August as part of its sharpened debt origination initiatives.
This article was updated February 15 with new comments from Mesa West Capital.
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