Mesa West Capital Raises $1.4B for Value-Add Debt Fund

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The financing markets have felt similar to a barren, arid landscape with tumbleweeds replacing dollars of late. But news out of Los Angeles shows there’s plenty of appetite for investment in debt, and plenty of need for transitional loans as the market finds a path to stabilization more broadly.

Private debt fund manager and portfolio lender Mesa West Capital — the credit arm for Morgan Stanley (MS) Investment Management — announced Monday that it raised $1.37 billion for a lending platform named Mesa West Real Estate Income Fund V.

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The capital was raised from insurance companies, domestic and international pension funds, and individual investors. The vehicle exceeds the original $1 billion target, and will be used to originate, purchase and manage loans secured by value-add and transitional assets throughout the country.

“In today’s environment, sophisticated investors are increasing their allocations to real estate credit with managers who have been tested through market cycles,” Mesa West principal Jeff Friedman said in a statement.

The fund is the largest in Mesa West’s closed-end, value-add series that started in 2005. It’s also the first funding vehicle raised by Mesa West since it was acquired by Morgan Stanley Investment Management in 2018.

An active lender in the transitional space, L.A.-based Mesa West has been busy putting past funding to work, having provided a five-year, floating-rate loan to Sares Regis Group for $139.9 million to acquire and reposition a 386-unit multifamily property in Broomfield, Colo., Commercial Observer reported in August 2022.

The same month, Mesa West also provided ESG Kullen and Angelo Gordon with $49.24 million for the recapitalization of a 219-unit multifamily property in Palm Beach County, Fla., and has originated $310 million in West Palm Beach, Delray Beach, Boynton Beach and Jupiter in the last few years.

The lending portfolio includes all major property types with loans ranging from $20 million up to $400 million. The firm says it has sourced and closed more than 400 transactions totaling more than $26 billion since its inception 19 years ago. 

Mark Hallum can be reached at mhallum@commercialobserver.com.