Oaktree, Veleta Form CRE Lending Platform

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Veleta Capital LLC and funds managed by Oaktree Capital Management LP have formed a strategic joint venture, Veleta Capital Partners, that will act as a new lending platform catering to the commercial real estate sector, including the multifamily arena.

In conjunction with the launch of the new partnership, Oaktree acquired a minority interest in Veleta Capital, a private equity real estate credit and investment management firm.

VCP brings together the complementary strengths of two Los Angeles-based firms to create a timely lending platform.

“We’re not attempting to time the market or predict a change in the cycle, but we do anticipate the current interest rate environment and recent volatility caused by the same will allow this new platform with Oaktree to provide greater certainty in an uncertain time in the markets,” Brian Murphy, managing partner & CEO of Veleta Capital LLC, told Commercial Property Executive.

READ ALSO: CRE Lenders Shift Focus to Alternative Assets

Oaktree brings to the table its expertise in global real estate and strength in credit investment, while Veleta Capital offers an integrated platform and a connected management team with an established track record in real estate credit and investment. Acting together as VCP, the joint venture will provide short-term, senior secured loans ranging from $2 million to $20 million, featuring terms of 12 to 36 months with options for extensions. In terms of asset locations, VCP will initially focus on assets located in Tier 1 and Tier II markets in the Western U.S.

An increasingly popular target market

While VCP will be open to loans on commercial and multifamily assets, the firm’s strategy involves targeting alternative commercial real estate assets, including self storage, cold storage, medical office buildings, data centers, industrial and warehouse properties.

Alternative commercial real estate has been rising on the CRE investment community’s radar. “Limited opportunities and record pricing in the favored sectors and markets are pushing more investors into alternative property types like life sciences, data centers, self storage and student housing, as well as various forms of debt,” according to the Urban Land Institute‘s and PwC‘s Emerging Trends in Real Estate 2022 report.

“These sectors are now gaining interest from a wider range of investors because they offer generally higher returns at higher cap rates (lower prices), often at no higher risk. Tenant demand in many of these alternative sectors is driven more by demographics than economic growth, making them less volatile over the business cycle—another appealing feature for investors.”

VCP will not be entirely rigid in its consideration of which properties it will consider for loans, however. It will contemplate additional commercial asset types on a case-by-case basis. When asked about the somewhat beleaguered office sector, VCP conceded that it is not off the table.

“We will consider smaller office properties in Tier 1 markets on a case-by-case basis, but traditional office is not a core focus of the strategy,” Andrew Marcus, managing partner & COO of Veleta Capital LLC, told CPE.

It’s early days yet for VCP, but the new platform may be the right venture at the right time. “So far, the response has been overwhelmingly positive,” Marcus added.