Rockpoint launches third growth and income fund; BC Partners builds real estate unit; Ohio Teachers’ invests in Hudson Yards
California Public Employees’ Retirement System (CalPERS) proposes plan for direct investing. The new strategies being discussed include long-term ownership of income producing companies and investment in late-stage technology startups, similar to a venture capital fund. The motive behind the shift is to circumvent paying private equity fees and boost returns by accessing coveted deals. If approved by the board, CalPERS would more than double its annual spending on private investments and could invest as much as $13 billion a year into n on-public companies.
Private equity outperforms public benchmarks for U.S. pensions. According to a new study from investment advisor Cliffwater, private equity produced a 10.7% annualized return across 21 state pensions between 2002 and 2017, outperforming a public equity benchmark. The custom public equity benchmark (weighted 70% Russell 2000 and 30% MSCI ACWI ex-US) generated a 6.6% annualize return over the same 16-year period. All of the 21 state pensions in the study outperformed public stocks, but individual PE returns ranged from 8.1% to 14.3%, signaling the importance of fund selection.
CAPITAL RAISING UPDATES
Rockpoint Group launches next real estate fund, less than six months after closing on its predecessor. Rockpoint Growth and Income Fund III (RGI III), the firm’s third lower-risk real estate fund, is targeting more than $2 billion and has already attracted significant investor interest. Rockpoint is expected to hold an initial close on at least $1 billion this summer, primarily from existing investors. The RGI III launch comes less than six months after the final close of its predecessor, which amassed $1.7 billion and is said to be 75% deployed with the acquisition of Spring Creek Towers, a 5,881-unit affordable housing complex in Brooklyn.
NREP held a final closing for NREP Nordic Strategies Fund III at its hard cap of €900 million. The closing represents the biggest for a real estate fund solely focused on the Nordic region and demonstrates strong demand for real estate in the perceived safe haven of that market. It is understood that the fund garnered interest from investors for as much as €2.3 billion, more than 150% of the fund’s target and hard cap, from both existing and new investors.
Qualitas is raising a cross-over fund. Last year, the Melbourne-based real estate specialist, acquired a portfolio of 10 flour-milling and bakery operations owned by Allied Pinnacle and built a cross-asset class vehicle around it. Qualitas Food Infrastructure Fund (QFIF), is seeking to raise $204 million and has already reached a first close primarily with commitments from existing investors.
“Over the coming period, we feel, there’s going to be an increase in crossover-style investments. The traditional real estate, infrastructure sectors and – at least in Australia – agricultural sectors are all starting to converge.” – Mark Fischer, Co-Founder and Managing Director
BC Partners launches real estate unit with industry hire. The firm has launched BC Partners Real Estate to pursue a pan-European opportunistic investment strategy covering all real estate sectors, making direct and indirect private equity real estate investments as well as controlling and minority investments. The firm has hired Stéphane Theuriau to lead its push into the asset class. Building out the team will be one of his first tasks. Theuriau previously served as co-manager and chairman at Paris-based real estate developer and fund manager Altarea Cogedim.
Pattar joins KKR as head of APAC real estate. John Pattar is set to lead global private equity firm KKR’s real estate business in Asia-Pacific. Pattar joins the firm from CLSA Capital Partners where he was the chief executive of its real estate business. At KKR, he will be based in Hong Kong to lead the firm’s existing Asia real estate platform. KKR did not have an official Asia-Pacific head of real estate position until now, although since 2013, Bryan Southergill, the firm’s managing director for APAC real estate, has been responsible for advancing the firm’s real estate strategy in the region.
Blackstone agrees to $4.8 billion LaSalle Hotel deal. Blackstone Real Estate Partners VIII plans to purchase U.S. hotel owner LaSalle Hotel Properties in an all-cash transaction valued at $4.8 billion. LaSalle Hotel Properties exited Hilton Worldwide on Friday after nearly 11 years by selling about a 5.8% stake in the hotel chain operator for about $1.32 billion. The parties expect to close the deal in the third quarter. LaSalle Hotel Properties owns 41 properties, which are upscale, full-service hotels, totaling approximately 10,400 guest rooms in 11 markets in seven states and the District of Columbia.
LIMITED PARTNER NEWS
The University of Michigan Endowment committed $40 million to Magna Hotel Fund VI. Like its predecessor, the fund will invest in hotels in primary markets (NYC, Boston, Washington DC) and will target limited service or select-service hotels which typically are underserved segments in these urban markets. The fund is seeking $250 million of capital commitments. The University of Michigan currently has a target allocation of 8.7% to real estate.
Minnesota State Board of Investments (Minnesota SBI) has committed $250 million to Angelo Gordon real estate funds. The public pension committed an undisclosed amount to each of AG Realty Fund X, a diversified opportunistic fund, and AG Asia Realty Fund IV, an opportunistic fund focused on China, Japan and South Korea. Minnesota SBI allocates less than 1% of its total assets to real estate.
State Teachers’ Retirement System of Ohio makes $432 million investment in Hudson Yards. The public pension fund paid $431.9 million to purchase a roughly 20% stake in the Coach-anchored 10 Hudson Yards, joining German insurer Allianz and the Kuwait Investment Authority as an investor in the 52-story, 1.7 million-square-foot tower at the corner of 10th Avenue and West 30th Street.
The Employees’ Retirement System of Texas (Texas ERS) plans to commit $550 million to private real estate in 2019. The target commitments are part of the pension fund’s proposed ERS Private Real Estate Portfolio Annual Tactical Plan for Fiscal Year 2019. The pension fund believes that opportunities to target noncore real estate will be the most attractive area in line with the current strategy. In addition, the investment board plans to selectively review opportunities in niche sectors (medical office, timber, agriculture and international core) and will seek to increase the portfolio’s international exposure closer to the target level of 30%. Through March 31, FY 2018 commitments to real estate totaled $417 million to eight investments, all but two of which were non-core commitments to successor funds of existing managers. Texas ERS currently targets a 10% allocation to real estate, and plans to increase that amount to 12% by 2020, as illustrated below.