Insights

KAP’s insights on private equity investor relations and fundraising

 

NYT probes endowments’ commitment to alternatives; Phoenix adds Australia to target markets; AKPERS seeks new value-add managers

 

MARKET NEWS

Callan adds alternative research to meet institutional investors demands. In response to a growing demand for alternative investments, Callan Associates – among other consultants – has spent the last few years building out its private markets research capabilities with dedicated specialists.

“Big state pensions, corporate pensions are shifting assets towards private investments – private debt, infrastructure, real estate, etc. – and in order to be relevant, that means we had to add resources in the area of private investments.”  – Greg Allen, CEO and President, Callan Associates

Despite lag, colleges prefer alternatives. Over the last decade, college and university endowments have underperformed funds offering a simple 60-40 or 70-30 stock-fixed income allocation. Despite the weak performance of many hedge funds, venture capital, and private equity in these portfolios, endowments aren’t following many of their pension fund brethren in fleeing alternatives. According to the recent study by NACUBO, last year, alternative investments accounted for an average of 52% of endowment assets — over 60% in the largest endowments.

Anbang seizure whets Chinese buyers’ appetites for buildings across U.S. With the temporary takeover of Anbang Insurance Group Co. by China’s government, real estate buyers are eyeing marquee properties from New York to California acquired in a global shopping spree. China’s Insurance Regulatory Commission (CIRC) has said that duties of the board and management will now be overseen by a working group of regulators from various agencies for one year.

 

CAPITAL RAISING UPDATES

  • Mesirow Financial raises $351 million for value-added fund. The Chicago-based financial services firm is targeting $750 million for the fund, Mesirow Financial Real Estate Value Fund III. The fund is a value-added real estate fund that will invest in multifamily assets throughout the U.S.
  • Bridge Investment launches two new real estate funds. Bridge Investment Group has launched two new real estate funds – one focused on debt and another focused on multifamily assets in the U.S. Bridge Debt Strategies Fund III will invest in debt and is seeking to raise $1.5 billion. The fund’s predecessor, Bridge Debt Strategies Fund II, held a $1.9 billion final close in August 2017. Bridge Multifamily Fund IV will invest in multifamily assets throughout the United States and has established a $1 billion fundraising target. Across all funds, the firm currently manages $8.85 billion.
  • Phoenix launches $900 million sixth Asia opportunities fund. Hong Kong-based Phoenix Property Investors has started fundraising for its sixth pan-Asia opportunistic real estate fund. The fund will seek investments in Australia for Fund VI, a first for its opportunistic series. The firm is targeting $900 million, which, if successfully achieved, will make it larger than predecessor funds. Phoenix Asia Real Estate Investments V closed on its $750 million hard cap in December 2013, surpassing its initial $600 million target, while the 2010-vintage Fund IV raised $460 million.

 

PEOPLE MOVES

American Realty Advisors adds to portfolio management and multifamily investment team. Glen Weisberg has joined ARA as an Executive Vice President. In this role, Weisberg will develop and oversee the strategic and tactical multifamily investment plan for the firm. Weisberg brings 28 years of real estate investment management experience to the firm. Prior to ARA, he served as EVP and COO of Hunt Investment Management. Previously he was CEO of Tuckerman Group, which was acquired by Hunt in 2012.

 

NOTABLE TRANSACTIONS

Host Hotels to buy three Hyatt-managed hotels for $1b. The three hotels under contract for acquisition are located in Hawaii, San Francisco and Florida. The hotels will continue to be managed by Hyatt under long-term management agreements. The deal is expected to close by the end of the first quarter.

AXA enters JV to acquire U.S. logistics properties.  AXA Investment Managers – Real Assets and Bixby Land Co. have entered into a new joint venture to acquire up to $400 million of logistics properties in the Western U.S. AXA IM – Real Assets is the majority shareholder in the JV and Bixby will act as property and asset manager. The JV will pursue core and core-plus industrial investments and leverage Bixby’s established acquisition pipeline and existing real estate operations platform.

“The asset class is supported by a number of strong fundamentals driven by structural changes in supply chains, e-commerce and consumer behavior and, as such, aims to deliver durable and growing long-term income streams.” – Steve McCarthy, head of North America at AXA IM – Real Assets

 

LIMITED PARTNER NEWS

 

  1. Arkansas Public Employees’ Retirement System (AKPERS) is looking to allocate to real estate over the next 12 months. The public pension fund will make commitments to strategies from TA Realty and Heitman, though the size of the commitments have not yet been determined. It will be looking to invest in value added strategies. Arkansas Public Employees’ Retirement System currently manages $8.3 billion and allocates approximately 9.9% of its total investments to real estate.
  2. University of Michigan (UM) Endowment has made two new real estate commitments. The endowment committed $30 million each to two real estate funds: Penzance DC Real Estate Fund, which invests in office, multifamily and development properties in the Washington metro area, and Detroit Renaissance Real Estate Fund, a real estate fund managed by Fortus Partners that invests in single and multifamily properties in the Detroit metro area. As of December 31, 2017, UM’s endowment was valued at $11.6 billion and allocates 9% of total assets to real estate.
  3. Massachusetts Pension Reserves Investment Management Board (Mass PRIM) committed $60 million to Berkshire Multifamily Debt Fund II. The fund will target multifamily debt with a focus on a portfolio of subordinated bonds, known as B-piece bonds, of Freddie Mac multifamily loan pool. The allocation falls under Mass PRIM’s value-added fixed income bucket, specifically within the Other Credit Opportunities (OCO) strategy. The $72 billion public pension fund currently allocates 8.65% of its total assets to the asset class, below its 10% target.
  4. Orange County Employees Retirement System (OCERS) hires Townsend for its real estate consulting services. According to a board meeting summary report, Townsend Group was a finalist selected as part of the Illiquid Investments Advisory Services RFP that was issued in the fourth quarter of 2017. The public pension also selected TorreyCove to provide private equity and real assets consulting. Both consultants are expected to provide strategic advice, source investments, conduct due diligence, report and monitor the illiquid assets of the portfolio.
  5. Connecticut seeks real estate fund consultant. The $44.1 billion Connecticut Retirement Plans and Trust Funds investment council unanimously approved the launch of a search for a new real estate consultant. Connecticut will part ways with Townsend Group after a decade. The scope of the mandate will include recommending changes to the investment policy annually, due diligence on all prospective real estate fund managers utilizing research and ESG factors, and that performance data be tracked at the portfolio and fund levels.