Starwood closes 11th fund with $7.5 bn; TIAA partners with Edge Technologies for data-led office strategy; Brookfield Ventures eyes real estate tech

 

MARKET NEWS

Industrial vacancy hits all-time low as technology, consumers change. A new report from Ten-X Commercial  notes changes in technology, supply chains and consumer habits continue to drive leasing demand for industrial properties. Specifically, 2017 was the sixth straight year during which rent growth accelerated, and the first year on record in which the industrial sector’s rent growth outpaced that of the other three major commercial real estate sectors. Ten-X, an online transaction platform, predicts more than 10 million square feet of projected net absorption this year, which would bring 2018 slightly below the levels of the past three years.

“Right now, industrial is the cream of the commercial real estate crop, and the trends that are driving the sector – including e-retail, cloud computing and legalized cannabis – show no signs of abating.” -Peter Muoio, Ten-X Chief Economist.

Brookfield’s new venture capital unit eyes real estate tech startups. Brookfield Ventures plans to invest $200 to $300 million over the next three years in startups that create potentially disruptive technologies in the real estate business.  To run the unit, Brookfield hired Josh Raffaelli, who has been working in the venture business for about 14 years for firms like Silver Lake and DFJ. Raffaelli has set up a five-person team in San Francisco to evaluate opportunities in areas like co-working and distribution facilities in e-commerce supply chains. The firm also plans to raise third-party capital to invest together with the firm’s money. Brookfield Ventures has just closed its first deal, a $15 million investment in BuildingConnected, a networking and preconstruction management site for owners, general contractors and subcontractors.

“We’re going to get access to deals that others wouldn’t get access to, and we’re going to be able to add value to things that others wouldn’t be able to add value to.” – Stewart  Upson, Managing Partner

 

CAPITAL RAISING UPDATES

Landmark Partners holds $3.3 billion final close for real estate secondaries fund. Landmark Real Estate Fund VIII (LREF VIII) continues Landmark’s secondaries investment strategy of acquiring interests in existing funds, partnerships and other structured entities invested in underlying real estate globally and stands as the largest real estate secondaries fund raised globally to date.  The fund’s predecessor held a $1.6 billion final close in 2015, exceeding its $1 billion target. At the time of final closing, LREF VIII was 42% committed across six secondary transactions, totaling $1.4 billion of exposure.

“Our dedicated real estate team, coupled with commitments from over 150 investors globally, positions Landmark as the leader in the real estate secondary market.” – Francisco Borges, Chairman and Managing Partner.

Starwood Capital Group holds $7.55 billion final close for largest fund in history. The firm’s 11th opportunistic real estate fund, Starwood Global Opportunity Fund XI (SOF XI) received commitments from more than 100 LPs and has already closed 17 transactions, representing more than $5 billion in total assets. The fund’s predecessor held a $5.6 billion final close in 2015.

“We continue to invest prudently and will remain focused on investments with stable and growing cash yields in the United States and Europe.” – Barry Sternlicht, Chairman and CEO, Starwood

Waterton collects nearly $1 billion for latest fund. Waterton Venture XIII launched in the fall of 2016 with a $750 million target. The multifamily value-added fund attracted $920 million in commitments from 14 LPs, half of which were re-ups and half of which were new relationships. Investors in the fund include Texas ERS ($65 million), Kansas PERS ($50 million) and the Orange County Employees’ Retirement System ($100 million). The fund’s predecessor held a $511 million final close in October 2015.

Pearlmark held a $104 million final close for fourth mezzanine real estate fund. The firm’s debt platform makes investments across major property sectors using a variety of debt instruments. Within each of its real estate strategies, Pearlmark invests in core and value-add opportunities. Since 2001, Pearlmark has originated more than 128 debt investments totaling approximately $1.6 billion on behalf of its mezzanine debt fund series and joint venture programs.

 

NOTABLE TRANSACTIONS

TIAA ties up with cutting-edge developer for $1.2 billion data-led office venture. The large pension fund has formed a €1B ($1.2B) partnership with a Dutch developer to build European offices that capture data about the people using them to improve the experience in the buildings. The partnership, managed by TH Real Estate was formed with EDGE Technologies, a real estate technology company launched by OVG Real Estate earlier this year. OVG is best known for developing the EDGE office building in Amsterdam, widely regarded as the most sustainable office building in the world. TIAA has already bought two offices totaling €200M and plans to fund up to €800M more, with a third deal imminent.

 

LIMITED PARTNER NEWS

 

Teachers’ Retirement System of Louisiana (Louisiana TRS) committed $50 million to Sares-Regis Multifamily Value-Add Fund III. The fund is focused on renovating and repositioning class B multifamily properties in the western U.S. The fund’s predecessor held a $304.2 million final close in 2016. Louisiana TRS currently allocates 8% to real estate, slightly below its 9% target.

State of Wisconsin Investment Board (SWIB) committed $100 million to CASA Partners VIII. The value-added real estate fund managed by TH Real Estate will invest in multifamily properties throughout the U.S. SWIB previously committed $100 million to the fund’s predecessor in 2016. The $97.4 billion public pension currently allocates 6% to real estate, below its 8% target.

South Carolina Retirement Systems (SCRS) looks to increase real estate and infrastructure allocations. The $31.8 billion public pension fund is planning to increase its real estate allocation from 8% to 9% and its infrastructure allocation from 2% to 3% in 2018. SCRS said the plan is to invest in core and core-plus real estate, which would be a change from recent years, during which it focused mostly on value-add and opportunistic strategies. The final decision will be based on the recommendations from its investment consultant, Meketa.