Insights

KAP’s insights on private equity investor relations and fundraising

 

Canadian deal volume hits record high; Colony launches debut RE infra fund; Tishman woos tenants with worker perks

 

MARKET NEWS

Commercial real estate deals in Canada hit a record $43 billion in 2017. The commercial real estate market in Canada remains very active even as residential markets in many of Canada’s largest cities cool off. Commercial property deals in Canada reached a record $43 billion in 2017, up from 2016’s record of $34.7 billion, according to CBRE. Historically strong fundamentals, including high rents and low vacancies, are likely to improve even further, pointing to potentially even higher investment in 2018.

In landlord wars, giants woo office tenants with worker perks. Tishman Speyer has launched an app dedicated to health, education and pampering for employees at Rockefeller Center in Manhattan to woo corporate tenants by appealing to their employees. Tishman expects to roll out the app in 8 of their 10 NYC commercial properties by next month and to spread the amenities to most of their U.S. properties by year end. Eventually, their entire global portfolio, covering 250,000 employees, would have access to the Zo app, allowing them to book amenities like a haircut, childcare, or a yoga class. In addition to Tishman, companies like Brookfield, Silverstein Properties, and SL Green Realty Corp are working to retain tenants and lure new ones away from their foes, in an intensively competitive market like New York where a surge of construction means tenants can flee to Hudson Yards, the World Trade Center or even across the river to Queens.

Online grocery sales to reach $100 billion by 2024. While online grocery sales represented only $19 billion or about 3% of total grocery sales in 2017, they’re poised to reach $100 billion (13%) by 2024, according to a study by Food Marketing Institute conducted by Neilsen. Depending on the property type used to fulfill online grocery sales, up to 35 million square feet of cold storage for food distribution could be shifted from retail to industrial properties.

 

CAPITAL RAISING UPDATES

Ardian Real Estate raises €700 million for inaugural European fund. The fund will target commercial properties in the core-plus/value-added segment and focuses on the main cities Germany, France, and Italy, where Ardian already has a background in direct private investment.

“The positive reception and strong support for this fund among both existing and new investors shows the appetite for this asset class. It is also recognition of Ardian’s strong track record and of the quality of its real estate teams in Paris, Frankfurt and Milan. We have already been able to deploy capital across nine assets that perfectly fit our strategy.” – Bertran Julien-Laferriere, head of Ardian Real Estate

Colony NorthStar has corralled $1.4 billion in a first close for RE infrastructure fund. The debut digital real estate infrastructure fund is being raised in cooperation with Digital Bridge, a Utah-based infrastructure company founded in 2013. The partners are targeting up to $3 billion in commitments to invest in data centers and cell towers, although the geographic focus has not yet been specified.

Prime Group Holdings holds $670 million final close for second storage fund. Prime Storage Fund II is a value-added real estate fund which focuses on acquiring self-storage properties throughout the U.S. The fund’s predecessor held a $154 million final close in 2016. The firm owns and manages more than $1.5 billion of self-storage properties across more than 180 self-storage facilities in 23 states.

 

PEOPLE MOVES

Capview Partners names new managing director / CIO. The firm has hired Mark Manheimer as managing director and CIO, where he will lead investment and fund management. Manheimer brings 20 years of experience in asset management, acquisitions, dispositions, and due diligence to the firm. Prior to joining Capview, Manheimer led business units at leading REITs, private equity and asset management firms, including Realty Income Corporation, Cole Capital, Spirit Realty Capital, Wells Fargo Securities and Patriarch Partners.

HSBC RE spin-out makes direct investing a key focus. Last summer, HSBC Alternative Investments lost four of its real estate investment professionals: global head of real estate Paul Forshaw, director Toby Evans, director Harry Heathcoat Amory and associate Will Michell. Last week, these HSBC alumni announced the launch of a London-based private equity real estate firm, Blue Noble. The firm launched in partnership with Swiss-based investment firm Woodman Group. Woodman committed $550 million of real estate assets and new capital. The strategic partnership aims to combine Woodman’s brand, scale and operational infrastructure with Blue Noble’s client-focused approach as a boutique investment management firm. The move reflects structural changes and macro trends that are currently impacting the financial services industry.

“Banks have, over recent years, increasingly returned their focus to core business areas including lending and asset custody rather than direct investment. With sustained demand from private banking customers for access to alternative investment product, Blue Noble should be well positioned to work with those banks, and other investors, to provide appropriate and compelling real estate investment solutions.” – Paul Forshaw, Managing Partner of Blue Noble

QuadReal Property Group appointments complete global leadership team. Jay Kwan joins QuadReal as Managing Director, Europe, to focus on building the portfolio in the UK and Europe. He formerly held senior positions at TPG Real Estate, Grove International Partners and Soros Private Funds Management. Jameson Weber joins the firm as Global Head of Special Situations. He focuses on global investments across technology-enabled and alternative real estate, companies and special situations. He formerly held senior positions at Hightower, Oaktree Capital Management and Cerberus Capital Management. With these hires, QuadReal Property has completed the build-out of the company’s international senior investment team.

 

NOTABLE TRANSACTIONS

AccorHotels sells majority holding in real estate arm for $5.4 billion. According to the signed agreement, the French hotel company would initially to sell 55% of AccorInvest to sovereign funds, including the Public Investment Fund (Saudi Arabia), and GIC (Singapore) as well as institutional investors, namely Credit Agricole Assurances, Colony NorthStar, Gulf Investment Corp., and Amundi. The AccorInvest hotels would continue to be operated by AccorHotels under long-term contracts.

“Following the separation of AccorInvest into a stand-alone legal entity last summer, we are now gathering a roundtable of leading investors, on the basis of a valuation that fully reflects its global leadership and the quality of its assets, while building a long-term relationship between AccorHotels and AccorInvest.” – Sébastien Bazin, chairman and CEO of AccorHotels.

ICG-Longbow and SDL Group launch BTR joint venture. Together the firms are targeting the build-to-rent (BTR) sector with plans to build more than 2,000 homes over the next three years. Branded “Wise Living,” the joint venture will acquire and develop detached and semi-detached housing for rent in the U.K., aiming to “challenge existing standards in the private rental sector, create new communities and ultimately drive improved living standards for its tenants.” Wise Living is already in advanced talks to acquire several sites with work expected to begin in the coming months.

 

LIMITED PARTNER NEWS

 

  1. Illinois Municipal Retirement Fund (IMRF) commits $150 million to separate account. The fund, Artemis MWBE Spruce Program, is a real estate investment vehicle advised by Artemis Real Estate Partners, a women-owned real estate firm. IMRF is committed to diversity and made $905 million in commitments to minority-owned firms in 2017. IMRF has also recently increased their exposure to real estate from 8% to 9%. As of December 31, 2017, the market value of IMRF’s real estate portfolio was $2.19 billion.
  2. Indiana Public Retirement System (Indian PRS) committed $50 million to LimeTree Capital. LimeTree is a private equity real estate manager with an opportunistic strategy in the Asia-Pacific region. It currently focuses on car parking ownership, development and management in China, and Asian emerging beachfront land investments.  Indiana PRS currently allocates 5.4% to real estate, below its 7% target.
  3. Los Angeles County Employee Retirement Association (LACERA) committed $50 million to AG Europe Realty Fund II. The value-added European vehicle is managed by Angelo Gordon and invests in office, hotel, industrial, multifamily and retail properties across western Europe and the U.K. It launched in Q1 2017 with a $750 million target and has raised $252 million to date. LACERA currently allocates approximately 11% to real estate, in line with their target.
  4. Ohio Bureau of Workers’ Compensation (Ohio BWC) committed $75 million to Brookfield Fairfield U.S. Multifamily Value Add Fund III. The value-added fund targets investments in apartment properties across the U.S. To date, the fund has raised $456.3 million. The fund’s predecessor held an $805 million final close in September 2014. As of December 31, 2017, Ohio BWC’s portfolio had a market value of $27 billion, with nearly 12% allocated to real estate assets.
  5. Teacher Retirement System of Texas (Texas TRS) committed $5 million to a private real estate fund. The public pension has approved a $5 million equity commitment to an undisclosed private real estate fund, according to a report from Aris Oglesby, operational due diligence analyst of the pension fund’s investments division. The commitment was made in February.