Oaktree Capital Closes $4.7B Fund Targeting Distressed Assets, Rescue Financing

The company has already committed $1.7 billion to acquire distressed real estate-related securities

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Global investors are building up their reserves of dry powder as they eye buying opportunities stemming from the coronavirus pandemic and the economic downturn that started more than 12 months ago.

Los Angeles-based Oaktree Capital Management announced today that it raised approximately $4.7 billion — its largest fundraise to date — to acquire assets they believe are undervalued. The funding vehicle, called Oaktree Real Estate Opportunities Fund VIII, exceeded its original target of $3.5 billion. 

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The company has already invested or committed about $1.7 billion of the fund, buying distressed real estate-related securities early in the pandemic and, more recently, executing relationship-based “rescue” financings for over-leveraged real estate lenders and owners.

Last year, Oaktree Capital acquired $572 million in real estate collateralized loan obligations (CLOs) from TPG RE Finance Trust, The Wall Street Journal reported.

“The COVID-19 pandemic has created a compelling set of credit-focused investment opportunities for our fund,” John Brady, head of Oaktree’s real estate group, said in a statement. 

Oaktree has been particularly active on the East Coast lately. This month, Commercial Observer reported that Oaktree was part of a $415 million refinancing for a 746,280-square-foot office in Manhattan, and the firm was also behind a quarter of the $400 million in financing for a CIM Group property. Additionally, Oaktree provided almost $63.7 million in condominium financing to LIVWRK and CIM Group.

Other major investors like Blackstone and Starwood have notably been scooping up shares in public real estate companies to take advantage of distress.