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Red Oak Capital Merges Four Bond Funds into a Series LLC

Red Oak Capital Merges Four Bond Funds into a Series LLC. Alternative investments, alts, bonds, financing, investment, offering, private equity, Red Oak, redeem, Regulation A+, Sales
Red Oak Capital Merges Four Bond Funds into a Series LLC. Alternative investments, alts, bonds, financing, investment, offering, private equity, Red Oak, redeem, Regulation A+, Sales

Red Oak Capital Holdings LLC, a national commercial real estate finance company and Regulation A+ sponsor, is bringing four of its bond funds under the control of a single master entity in a newly structured series LLC.

The investment vehicles being merged into the Red Oak Capital Fund Series LLC include Red Oak Capital Funds II, IV and V, as well as Red Oak Capital Income Opportunity Fund.

“The rollup of the funds illustrates one of the key advantages of the Regulation A+ structure—allowing for the efficient formation of capital that enables issuers to take advantage of long term, and large scale, organic growth,” says Raymond Davis, Red Oak’s chief strategy officer. “We conducted a statutory merger on a ‘one-for-one’ basis of each fund into its own specific series.”

In other words, “the Series LLC will serve as an umbrella company for the funds, but each vehicle will retain its own assets and obligations at the Series level,” said Red Oak’s chief legal officer, Rob Kaplan. The company says the aggregated Series Fund will allow it to further diversify investors into more loans by allocating positions across the series LLC funds.

The Series LLC will become the single reporting company for all the bond offerings, which will Red Oak says will streamline compliance and mitigate costs.

“The formation of this Series LLC allows us to realize efficiencies and cost savings by treating these vehicles as a single entity for tax and filing purposes,” Kaplan added.

According to the company, the Red Oak Series LLC includes:

  • Red Oak Capital Series II (Formerly ROCF II): A $50-million Tier II offering launched in 2017. It consists of 6.5% Series A bonds maturing December 31, 2021, and 8.50% Series B bonds maturing December 31, 2024.
  • Red Oak Capital Series IV (Formerly ROCF IV): Qualified in 2020, the $50-million Regulation A+ Tier 2 offering consists of 6.25% Series A bonds, 8.25% Series B bonds, 6.5% Series Ra and 9.0% Series Rb bonds. The company elected to redeem all the outstanding Series A and Ra bonds in June 2023.
  • Red Oak Capital Series V (formerly ROCF V): A $75-million Regulation A+ Tier II bond offering initially qualified by the SEC in 2020. The 7.5% A and B bonds and the 8.0% AR- and BR-bonds respectively mature at yearend 2026 and 2027.
  • Red Oak Capital Income Opportunity Series: $150-million Regulation D vehicle launched in 2020, offering 8.0% CORE Bonds and 8.65% Core R-Bonds.

Rather than being four separate funds limited to $50 million or $75 million, the new entity will have collective assets under management of $325 million.

“It creates more diversification for the respective bondholders and allows management to make allocations more efficiently,” Davis relates explains. “Combining these funds into a single entity also boosts our ability to source capital, which can then increase the Series’ overall lending volume.”

The issued bonds are secured by senior commercial mortgage loans that are backed by existing income-producing commercial real estate properties in primary and secondary markets in the U.S.

Since the Series LLC structure effectively allows the individual Series within it to operate as its own business, Red Oak did not have to undergo a laborious bondholder consent process before merging its vehicles. Each Series has assumed the obligations of each bond issuance and has entered supplemental indentures related to the same with the Indenture Trustee.

Red Oak Capital Holdings is a group of commercial real estate capital entities that lends and invests on commercial real estate, raising capital through retail and institutional channels. The firm has more than $400 million of assets under management and commitments from both retail and institutional investors.

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