WeWork’s $702M bond issuance oversubscribed, falling; GreenOak raises $1.1B for European RE; Prologis expands with $8.4B DCT acquisition
Insurers embrace ‘new world order’ for asset allocation. According to a new report and proprietary survey from KKR, insurers have nearly doubled their private equity allocation – now 2.4% for survey respondents – since 2014. The report attributes this change to factors including growth in excess capital across the insurance industry, more efficient structures, and low correlations among alternative investment strategies. Approximately 27% of survey respondents indicated they intend to increase their allocations to private equity this year, 29.5% plan to up their private credit exposure and 36.4% will increase their allocations to real estate credit.
PERE publishes its flagship ranking, the PERE 50. The latest report reflects an uptick in fundraising, with aggregate capital of almost $334 billion. The top 50 value-added and opportunistic real estate fund managers raised nearly 20% more capital this year than last. Of that 50, the ranking includes GPs like Blackstone, Brookfield and Starwood, each having amassed more than $20 billion. In addition, the proportion of large managers based outside the U.S. has grown – 12 of the 50 are non-U.S. investors. Relative to 2017 on the ranking of 300, Singapore-based logistics firm ERS climbed the most (111 spots) and Fortress Investment Group fell the furthest (34 spots). See chart below for other significant movers.
WeWork’s debt issuance oversubscribed, slumping. Last week, WeWork issued seven-year unsecured bonds with a 7.875% annual interest rate. Proceeds are expected to fund the company’s ongoing global expansion. Investor demand triggered the company to increase the initially planned issuance from $500 million to $702 million. Selling at par, the bond was the most active in the U.S. high-yield market on Monday, and has fallen for the fourth straight day to 95.75 cents on the dollar. That’s a sharp contrast to the outsized orders the company saw when it marketed its debt in primary markets last week.
5 Ways Landlords are Using Technology as the New “Amenity”. As tech-savvy TAMI tenants outpace the leasing power of traditional FIRE business tenants, landlords are increasingly using technology as a selling point – a new amenity – to lure firms to their office buildings.
CAPITAL RAISING UPDATES
GreenOak raises $1.1 billion for European real estate. GreenOak Europe Fund II held a final close on €656 million of equity commitments, exceeding its €500 million target. An additional €255 million in co-investment capital was raised by the Euro-denominated fund, which will acquire assets across Western Europe. In 2015, the fund’s predecessor closed on €321 million, comprising €250 million of fund capital and €71 million in sidecars. In raising nearly three times the equity for its second vehicle, GreenOak, like its peers Benson Elliot and Rockspring, are capitalizing on increased demand for European real estate strategies from the institutional investor community. Global allocations to real estate are expected to increase to 10.2% in 2018 from 8.9% last year, and more than 40% investors in a recent survey from INREV indicated Europe was their preferred region.
TA Associates Realty launches new core property fund. TA Realty Core Property Fund is an open-ended vehicle that will focus on a diversified range of property types across the U.S. Established in 1982, the Boston-based firm has raised nearly $10 billion across 11 funds in their value-add, commingled series. As of September 30, 2017, TA Realty’s core separate/advisory accounts totaled approximately $5.2 billion in gross AUM.
PCCP raises $486 million for new real estate fund. PCCP Equity VIII is an opportunistic fund that will focus on middle-market properties (office, retail, multifamily and industrial assets) across the U.S. The fund’s target is not known, but its predecessor held a $601 million final close in August 2016, surpassing its $500 million target.
Prologis to buy DCT Industrial for $8.4 billion. Prologis, the world’s largest owner of distribution centers and logistics properties, has agreed to buy logistics-property owner DCT Industrial Trust for $8.4 billion including debt. The deal is the largest for Prologis since it merged with AMB Property in 2011 in an $8.7 billion transaction. According to NREI, Prologis had an estimated 676 million square feet of warehousing under its control at the end of 2016 and DCT was No. 10 in the world in the same survey, with 74 million square feet of space. Both companies have a footprint in key industrial real-estate markets and the combined entity intends to capitalize on increased demand for industrial properties as e-commerce companies set up warehouses closer to major population centers.
CBRE Global Investors appoints Philip Dunne EMEA head of logistics. CBRE Global Investors has appointed Philip Dunne as EMEA head of logistics. In this position, Dunne will be responsible for the logistics platform in EMEA, focusing on delivering investment performance for investors from the firm’s EMEA logistics and industrial real estate portfolio. Prior to joining CBRE, Dunne was the president of Prologis Europe from 2008 until 2015.
LIMITED PARTNER NEWS
Alameda County pension fund commits $25 million to AEW fund. AEW Partners Real Estate Fund VIII will invest in properties that are under-performing or require renovation or repositioning across the U.S. The fund also acquires distressed debt and may write high yield loans. The $8.7 billion public pension currently allocates 6.36% of total assets to real estate, below its 8% target.
Florida State Board of Administration (FSBA) commits $100 million to AEW Value Investors Asia III. The value-added fund, which was launched in 2016 with a $750 million target, will invest in the major Asian gateway cities of Hong Kong, Seoul, Shanghai, and Taipei, Taiwan. The fund’s predecessor held a final close on $640 million in 2016. The $205 billion public pension plan currently allocates 8.6% to real estate, below its 10% target.
Fort Worth Employees Retirement Fund committed 25 million to IPI Data Center Partners Fund I. The non-core real estate vehicle will invest in data centers in North America and Western Europe and is managed by IPI Data Center Partners Management. The commitment will be part of the pension fund’s high growth portfolio which has a 22% target allocation.
Tennessee Consolidated Retirement Systems will commit $150 million to three real estate funds. It will be allocating $50 million into each of GreenOak US Fund III, Savana Real Estate Fund IV and CBRE Strategic Partners US Value 8. The commitments to Savanna and CBRE are both follow-on investments. The $47 billion pension fund currently allocates 7.7% of its total investment portfolio in real estate, slightly below its 10% target.
University of New Hampshire Foundation has committed $5 million to AG Realty Fund X. The opportunistic vehicle managed by Angelo Gordon, will invest in office, retail and mixed-use property types across the U.S., Europe and Asia. University of New Hampshire Foundation currently allocates 4% of its total assets to real estate.
Pennsylvania State Employees’ Retirement System replaces real estate managers of separate accounts. The $29.1 billion public pension fund has removed Lowe Enterprise Investors from two if its real estate separate accounts, worth a combined $2.4 billion. The pension fund has hired LaSalle Investment Management and Hotel Asset Value Enhancement (HotelAVE) as replacements. Per its 2018-2019 strategy plan, PSERS will commit up to $600 million – in $50 million+ bite sizes – to real estate funds across the risk spectrum. Part of its real estate allocation will also go to real estate securities and investments in infrastructure and natural resources. PSERS also recently extended its contract with RVK until April 9, 2019 and hired LaSalle Investment Management to manage a real estate asset portfolio.