Oak Real Estate Unveils $500M Fund Targeting Underserved Markets

Oak Real Estate Partners, a Bloomfield Hills, MI-based national fund manager, has launched Oak Institutional Credit Solutions, a $500M private debt-financing fund that will provide short-term bridge loans in underserved markets.

The fund will specialize in providing CRE-backed senior mortgage bridge loans, customized loans that provide short-term financing for the “purchase, rehabilitation, repositioning and retenanting” of properties in multiple asset classes across all US geographic regions, Oak Real Estate Partners said.

The fund manager, owned by White Oak Capital Holdings, said the new debt-financing fund will offer bridge loans for renovations and upgrades and to borrowers who “cannot initially qualify for permanent financing from conventional lenders.”

Oak Institutional Credit Solutions is a perpetual term fund that seeks to raise $200M from foundations, endowments and multifamily offices and will seek to leverage another $300M.

The new investment instrument is the company’s first fund to serve the foundation and endowment investor class through its Red Oak Capital Holdings affiliate, which previously has delivered seven funds to retail investors.

The new fund expects to acquire up to 100 assets for its portfolio when fully deployed. According to its offering, the fund is aiming to achieve average annual preferred returns of 6%, with “follow-on waterfall economics.”

Oak Real Estate Partners said Oak Institutional Credit Solutions will “capitalize on significant investment opportunities that exist in a highly fragmented, inefficient and underserved small- to mid-balance lending market,” according to a report in dbusiness, a Detroit-area business journal.

The fund’s strategy focuses on “balance sheet “credit lending that targets short-duration commercial mortgage assets collateralized and secured in the first lien position by high-quality income-producing properties.

Gary Bechtel, CEO of Oak Real Estate Partners, told dbusiness the new fund will be basing pricing of its loans on a property’s “current and future value” and on the level of risk involved. Higher-risk projects will get structured loans with higher interest rates, he said.

Bechtel indicated he expects a high demand for bridge loans. “Bridge loans are a compelling financing vehicle, especially in situations where a property has below-market occupancy rates, the borrower’s credit profile needs improvement and/or the borrower has an opportunity and needs to close in a faster timeframe than (what is) possible with other traditional lenders,” Becthel told dbusiness.

Oak Real Estate Partners said it is aiming for a diversified revenue stream that manages risk and is not impacted by broader financial markets.