InsightsKAP’s insights on private equity investor relations and fundraising
RE secondaries volume up; Wynn continues Las Vegas expansion; PGIM RE bolsters impact investing team
Downtown Los Angeles is experiencing a flood of multifamily supply. More than 4,000 new apartments are forecast to hit the market this quarter, with as many as 30,000 expected over the next three years. Much of the construction is concentrated downtown and almost all the new apartments will serve the higher end of the market.
“This is the heaviest period in multifamily construction in Los Angeles since the early ’90s,” – Steve Basham, CoStar Analyst
Real estate secondaries dollar volume jumped 20% from 2016 to 2017. According to a report from secondaries firm Landmark Partners, 108 secondaries deals closed or went under contract in 2017, totaling $6 billion. Endowments comprised the bulk of sellers, accounting for 46% of transaction volume. Harvard Management Company led its peers, selling almost $2 billion of real estate assets to Landmark and Carlyle’s Metropolitan Real Estate.
IREI and GRESB published their second ESG Means Business report together. The complimentary 20-page report focuses on the accelerating acceptance and maturing best practices of ESG investing.
CAPITAL RAISING UPDATES
- Argosy Real Estate Partners has raised additional capital for its fourth real estate fund. Argosy Real Estate Partners IV has now raised $205 million in equity commitments. The fund’s predecessor held a final close in April 2015, raising $200 million.The firm is targeting $250 million for Fund IV with a $300 million hard-cap and anticipates a final closing in June 2018.
- Square Mile Capital launches new debt fund. Square Mile Credit Partners II (SCMP II) will focus on the origination and acquisition of first mortgage loans, mezzanine loans and B-notes in the U.S. No fundraising target has been announced.
- HarbourVest Partners launches its fifth co-investment fund. HarbourVest Partners Co-investment V is targeting $2.5 billion and is expected to hold a first close in Q3 2018. The fund’s predecessor was initially launched with a $1.5 billion hard-cap and closed on $1.75 billion in July with commitments from more than 100 investors. The increase in targeted fund size comes amid growing LP demand for co-investments, with 41% expecting to deploy more capital into the strategy over the next 12 months.
Wynn Resorts plans fourth Las Vegas hotel. The new hotel will be built on the site of the former Frontier hotel, across Las Vegas Boulevard from Wynn’s two existing properties and will feature approximately 2,500 hotel rooms. Wynn acquired the 38-acre site for $336 million in December. The company’s average room rates are rising and will likely hit $400 by the time all the rooms under construction are finished.
PGIM Real Estate hires Lisa Davis to lead impact investing. Davis will join the firm as executive director and portfolio manager to lead impact-oriented real estate investment initiatives focused on affordable housing in the U.S. Throughout her career, Davis has focused on improving housing and economic conditions in low-income communities. Prior to PGIM Real Estate, she executed large-scale affordable housing and redevelopment projects for both for-profits and nonprofits. Previously, Davis led affordable housing and community development finance strategies at the Ford Foundation and helped establish Ford’s impact investing program.
LIMITED PARTNER NEWS
- Ohio Police & Fire Pension Fund (OP&F) approved a $60 million commitment to Almanac Realty Securities Fund VIII. This is the first commitment of the year for the $15.5 billion public pension fund, which is planning to deploy between $115 and $165 million in new real estate commitments this year.
- New York State Common Retirement Fund (NY Common) has approved $325 million of real estate commitments. The public pension has committed $200 million to secondaries fund Landmark Real Estate Partners VIII, $50 million to Avanath Affordable Housing III and $50 million to Avanath III NY Co-Investment Fund. Avanath is a new relationship for the pension fund. As part of its emerging manager program, NY Common invested $25 million in Basis Investment Group Real Estate Fund I.
- Pennsylvania State Employees Retirement System (PSERS) discussed their 2018-2020 strategic business plan and reviewed their 2018-2019 asset allocation policy. The portfolio review presented by RVK notes global equity at 55% of the overall fund, exceeding its target by 7%. In order to be in-line with the 2018-2019 policy, real estate and multi-strategy allocations will need to increase by 4% each.
- New York State Teachers’ Retirement System (NYSTRS) approved a $200 million commitment to a separate account managed by Prima Capital Advisors. The SMA invests in CMBS, REIT bonds, first mortgage loans and related investments. NYSTRS also hired Federal Capital Partners to act as a U.S. multi-family separate account advisor to assist with the acquisition, management and exit of multi-family properties. The $117.5 billion public pension is an active investor in real estate with an actual allocation of 14.1% to the asset class, below its 18% target. The diversification of the real estate portfolio by property type as of September 30, 2017 is illustrated below.