CalPERS creates sustainability investment chief; Michigan commits 1.7bn to real estate; Placement agents capitalize on direct investing trend
Fundraising totals finally move upward. IREI’s Fund Tracker “First Look” shows that Q1 2018 saw 21 funds close on $27.4 billion of capital. At this time last year, only $12.4 billion was raised by 18 funds in the first quarter of 2017. As additional data gets captured these figures may increase, signaling a positive fundraising momentum to kick off the year.
Placement agents follow direct investing shift. In recent years Limited Partners’ have become increasingly interested in direct investing, which has provided an opportunity for placement agents to diversify their revenue streams. Rather than ignoring the trend, some placement agents, like Eaton Partners, have decided to turn this to their advantage. In 2016, Eaton Partners was acquired by Stifel Financial, and part of the attraction for the placement agent was the access to deal flow Stifel could provide. Eaton Partners isn’t the only firm taking advantage of this new opportunity. The fund placement team at Moelis & Company can offer individual transactions to LPs, while Mercury Capital Advisors has rebuilt this capability after its spin-out from Merrill Lynch in 2009.
“We had two decisions: we could either ignore it and say ‘well we’re just going to keep raising just funds and we’re going to lose an increasing segment of our investor universe’, or we could continue to raise our funds but we could also try to bring investments and product ideas to investors that are no longer doing funds… we clearly chose the latter.” –Jeff Eaton, Eaton Partners
Sam Zell and Goldman Sachs invest in Argentine real estate. A venture led by Sam Zell’s Equity International and Goldman Sachs (through its merchant-banking division). is investing more than $300 million in Argentine real estate. The venture has purchased a portfolio of commercial property as well as land for future development in the Buenos Aires area. It is also buying the developer of those two projects, a company named Rukan, which is being renamed ARG Realty Group. The deal is one of the largest foreign investments in Argentine real estate since Mauricio Macri took office in 2015 and marks the first time the Goldman MBD has invested in Argentina in more than 15 years.
CAPITAL RAISING UPDATES
Starcrest closes second China real estate fund with $276.5 million. In 2011, the firm raised $155 million for its maiden debt vehicle and $147 million for its opportunistic/value-add fund. Founded in 2010, Starcrest focuses exclusively on special situations and distressed real estate in China.
Harrison Street Real Estate hires Albert Yang head of European investor relations. In this role, Yang will assist the firm in broadening its European capabilities and will be responsible for client relations, capital raising and business development in the EMEA region. He will report to Geoff Regnery, senior managing director and global head of investor relations. Yang brings more than 16 years of experience to the firm, most recently having served as an MD at Barings Real Estate. Prior to Barings, Yang worked for J.P. Morgan Asset Management, where he served as executive director of global real assets.
“As Harrison Street’s platform continues to expand globally, Albert’s deep relationships with the global investment community and experience raising capital across the risk spectrum — from core to opportunistic real estate strategies — will significantly enhance our ability to meet the needs of our clients in Europe and Asia.” – Geoff Regnery, Senior Managing Director, Global Head of IR.
CalPERS appoints first sustainable investment managing director. Beth Richtman will be moving to the position as Managing Investment Director of the Sustainable Investment Program in the next month. She currently serves as an investment manager in CalPERS’ real assets program where she was a key architect of the sustainable investment practice guidelines for real assets. In her new role, Richtman will manage ESG investment decision making across the total fund, providing centralized leadership and strategy related to ESG issues.
Hamilton Lane real assets head retires. Jerry Gates, who has led the firm’s real assets platform since 2011, will be replaced by Steve Gruber and Brent Burnett, who joined the firm last summer through Hamilton Lane’s acquisition of consultancy Real Asset Portfolio Management. Gruber and Burnett have transitioned into the leadership role over the last few months as Gates stepped back. The firm has not seen any other major senior leadership changes for its real assets platform since the acquisition.
Allrise hires CEO, plans first institutional real estate funds. Inna Zhuranskaya assumed the position last month as the firm announced plans to expand from a conglomerate operating largely as a family office to an investment manager with real estate debt funds backed by institutional investors. Prior to Allrise, Zhuranskaya worked at the Singaporean sovereign wealth fund GIC, Deutsche Bank, Merrill Lynch and most recently Sterne Agee. The firm focuses on bridge loans, lending $1 million to $30 million per deal. Allrise is targeting a summer launch for real estate debt funds focused on the U.S., to be followed by two other funds targeting Central and Eastern European countries with a similar strategy to the U.S. fund. The company has not disclosed targets for the raises.
LIMITED PARTNER NEWS
Michigan Department of Treasury has committed $1.7 billion to three real estate funds. The public pension committed $244 million to a separate account managed by Principal Real Estate Investors; $10 million to Alidade Capital Fund IV, a value added private real estate fund; and $1.45 billion to MWT Holdings managed by Domain Capital Advisors. MWT Holdings is a separate account focused on investment in and development of high-quality apartment properties. The $70 billion pension currently allocates 8.6% of its portfolio to real estate, just above its 8.5% target.
Teacher Retirement System of Texas (TRS) committed $200 million to CBRE U.S. Development Partners 5. The fund will invest in opportunistic real estate assets across the U.S. CBRE held a first close on the $200 million commitment from Texas Teachers in March. TRS currently has $146.3 billion of assets and maintains a 14% target allocation to real estate.
Alaska Retirement Management Board (ARMB) committed $200 million to BlackRock U.S. Core Property Fund. The open-ended private REIT will invest primarily in income-producing properties located in large metropolitan areas across the U.S. The $33 billion public pension currently allocates 5.5% to real estate, below its 10% target.
Arkansas Teacher Retirement System committed $180 million to four real estate funds. At their most recent board meeting, the public pension made the following commitments: $50 million to MetLife Commercial Mortgage Income Fund, a core debt fund; $30 million to Almanac Realty Securities VIII, a value-added fund; $25 million to Carlyle Realty Partners VIII, an opportunistic fund; and $25 million to Kayne Anderson Real Estate Partners V, an opportunistic fund. The $16.3 billion public pension currently allocates 9% to real estate, slightly below its 10% target.
Los Angeles City Employees Retirement System (LACERS) commits $35 million to Almanac Fund. The pension fund will vote to approve the commitment at its April 10 investment meeting. Almanac Realty Securities VIII is a U.S.-focused value-added real estate fund, focused on providing growth capital to real estate operating companies that have property portfolios with existing cash flow and value-added potential. The vehicle is targeting $1.5 billion with a hard cap of $2 billion. The $17 billion public pension fund committed $25 million to Almanac Realty Securities VI in 2013. LACERS currently allocates 5% of their total portfolio to real estate.
New Mexico State Investment Council considers a $140 million portfolio rebalance. If approved, the plan would liquidate $140 million of equity and cash holdings and reinvest the capital across two real estate funds and one infrastructure fund. Specifically, $75 million would be committed for Heitman America Real Estate Trust, $30 million would be committed to Clarion Lion Industrial Trust, and $35 million would be committed to JPM Infrastructure Investment. The $23.6 billion sovereign wealth fund currently maintains a 9% allocation to real estate, below its 12% target.