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Calmwater Capital Completes Final $636 Million Closing on Third Fund

National CRE Lender has Invested in 44 Loans to Date
January 17, 2018
Calmwater Capital, a leading national direct commercial real estate lender, held final closing of its third fund, U.S. Real Estate Credit Fund III, with $636 million in total commitments.

Similar to its two prior funds, Los Angeles-based Calmwater said it is focusing the fund on originating $5 million to $50 million senior loans for "fundamentally sound assets, but where the financing requires a sense of urgency or complexity and the potential to earn superior risk-adjusted returns."

Calmwater has already invested in 44 loans from the fund -- all senior liens with a substantial equity cushion, the company said.

"Our ability to move quickly and deal with complexity has earned the firm a reputation as a 'go-to-lender' for our targeted lower middle-market bridge loans - a relatively inefficient and deep segment of the market," said Larry Grantham, founder and senior portfolio manager of Calmwater.

The fund's investors include endowments, pension funds and family offices, based in North America, Asia, Europe and South America. Among them is the Arkansas Teacher Retirement System (ATRS), which invested $30 million this past fall.

According to ATRS, the fund is focused primarily on making senior secured loans on transitional commercial real estate properties.

Transitional lending is the capital used during the value add period of renovation, re-tenanting, or repositioning of a commercial property. Upon completion of the value add process the owners typically refinance with longer term, lower cost mortgages as the properties are fully occupied and present less risk to the new lender.

Calmwater's first two funds generated net internal rates of returns (IRRs) of 13.1% (Fund I) and 8.7% (Fund II), according to ATRS. Fund III is targeting net returns of 12% to 14%.

San Francisco-based Probitas Partners acted as the placement agent for the fund.

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