Brookfield Asset Management has launched an open-ended real estate debt fund and is looking to raise $1bn (€805m), according to a prospective investor.
San Diego County Employees Retirement Association (SDCERA) approved a $100m commitment to the vehicle in December, according to a board meeting report.
An SEC filing shows Brookfield Senior Mezzanine Real Estate Finance Fund was incorporated last year. Brookfield was not readily available to comment.
According to SDCERA, said Brookfield had already raised between $400m and $500m for the fund.
Brookfield hopes to reach $1bn in a first round of fundraising. Additional capital “will be raised year-by-year depending on market conditions”, the SDCERA report said.
The report, written by SDCERA chief investment officer Stephen Sexauer, also said the fund will target investments in the “credit risk position between the senior debt and equity portions of the capital stack”.
The fund will primarily invest in senior mezzanine loans, either through origination or acquisition in the secondary market, it said. Loans will have a loan-to-value ratio in the range of 50-60%, with a maximum of 70%. The fund will also selectively invest in first-mortgage loans and single-borrower commercial mortgage-backed securities. For most investments, Brookfield will underwrite entire loans.
Brookfield Real Estate Finance Group has invested $440m in a similar strategy in a separate account, according to SDCERA.
The commitment from SDCERA marks the first time the pension fund has invested in real estate with Brookfield.
The pension fund previously invested in the Brookfield Americas Infrastructure Fund and Brookfield Brazil Agriland.
SDCERA’s real estate portfolio was valued at $960m at the end of September 2017, making up 7.9% of its $12.2bn in total assets.