Red Oak launches retail investor-oriented debt fund

The debt fund provides small-balance sheet loans for commercial real estate.

Red Oak Capital has rolled out a retail-oriented debt fund that will make small balance commercial real estate loans across sectors throughout the US in primary and secondaries markets. The debt fund will originate loans of $2 million to $15 million on income-producing commercial real estate properties and portfolios.

This hybrid fund comprises two distinct products, a bond offering that accepts qualified investors with a minimum purchase of $10,000 and a preferred unit that is open to taxable investors and offers a higher yield.  

“It allows us to take in both qualified and taxable investments while increasing returns for both,” said Raymond Davis, chief business development officer at the Grand Rapids, Michigan-based manager. 

The firm is distributing the fund via a broker-dealer channel, with Davis noting the structure accounts for different risk profiles as well as the need to comply with ERISA regulations.  

As a lender that focuses mainly on small balance loans, the roughly $400 million manager has been working to expand its lending platform. “For a little company, we’ve got two different product platforms,” said Davis. “We have everything from a BB-plus investment grade rated fund to a distressed fund. We cover the whole gamut.” 

The Red Oak holds all underwiring of loans on the balance sheet with good quality, focusing on providing insurance company-standard lending. “The quality of our underwriting is the quality that insurance companies would expect across the boards,” Davis said.