Demand continues for debt-only funds; Greystar closes first credit vehicle; Commonfund appoints Mark Anson CEO
Debt fund market share strengthens. The volume and value of real estate debt funds increased significantly in 2017. According to IREI’s latest FundTracker, debt-only funds continue to capture a growing share of the market, with total capital raised accounting for 31% of funds closed in 2017, up from 20% in 2016 and 14% in 2015. Of the 509 real estate funds that have held a final closing since January 2015, 80 funds (16%) were focused exclusively on debt.
LP shift to direct investing puts pressure on talent supply. In another key finding of Coller Capital’s latest PE Barometer, the growing appetite for direct investments among institutional investors is intensifying competition for high-quality talent. The survey found that LPs whose remuneration is tied to the performance of their private equity portfolios are almost three times more likely to deliver returns in excess of 16%. A majority of LPs find recruitment to be a significant barrier to improving PE returns.
CAPITAL RAISING UPDATES
Greystar closes on $500 million for Greystar Credit Partners I. The multifamily real estate firm continues their platform expansion with a real estate credit fund, which held a one-and-done close on $500 million from a single investor. The fund’s strategy will focus on acquiring subordinated and securitized debt issued by U.S. government sponsored entities (GSEs). The firm declined to name the institution, but it’s understood that the sole limited partner was an existing Greystar investor.
“What got this started was really an inbound request from one of our institutional capital partners who said, ‘We’re really interested in this space, and your skills lend us a unique competitive advantage to this.’” – Bob Faith, Founder & CEO, Greystar
Almanac Realty raises $1.1 billion for real estate securities fund. Almanac Realty Securities VIII is a value-add real estate vehicle that makes growth-capital investments into real estate operating companies in the U.S. The fund received commitments from Ohio Police & Fire Pension ($60 million) and the New Mexico State Investment Council ($75 million). The fund’s predecessor held a $1.42 billion final close in June 2015, exceeding its $1 billion fundraising target.
Commonfund appoints Mark Anson CEO and president. The asset manager for endowments, foundations and public pensions unanimously selected Anson to lead the firm, succeeding Catherine Keating, who will be leaving at the end of the month. Mr. Anson will continue to serve as the Chief Investment Officer and the Chairman of the Boards of Commonfund Capital Inc. and Commonfund Asset Management Company, Inc.
Apollo’s RE team remains intact after Azelby’s departure. Global Head of Real Assets Joe Azelby has left Apollo Global Management after spending just a year at the NY-based firm. Formerly a JP Morgan executive, Azelby was hired by Apollo to build out its real assets platform. Neither Azelby nor the firm could be reached for comment, but it is understood that he will not be replaced. The existing team remains intact: In November, Philip Mintz was promoted from partner in Asia to CIO of the real estate group with increased responsibilities in the Americas. Roger Orf, who has been with the firm since 2010, continues to oversee Apollo’s European real estate business and Scott Weiner remains head of global commercial real estate debt.
LIMITED PARTNER NEWS
Arkansas Teacher Retirement System committed $30 million to FPA Core Plus Fund IV. Managed by FPA Multifamily, the fund is a closed-end core-plus real estate vehicle that invests in multifamily properties with a fundraising target of $650 million. The $16.1 billion public pension currently allocates 12.1% of assets to real estate, below its 15% target.
Employees Retirement System of Texas (Texas ERS) has committed $100 million to two real estate funds. Texas ERS committed $50 million to MH Legacy Fund II, which invests in manufactured home communities in the U.S. and another $50 million to ERS Private Real Estate Emerging Manager II, as a follow-on commitment. The $28 billion public pension currently allocates 9.4% to real estate, below its 12% target.
Los Angeles County Employees Retirement Association (LACERA) sets new allocation targets. The public pension will vote on a proposal to increase its exposure to illiquid credit from 1.7% of the portfolio to 3%. Among the strategies that fit in the bucket are credit hedge funds, real estate debt and private debt. The breakdown of the private credit strategies is focused on higher-returning products: 40% mezzanine, 40% distressed and 20% direct lending. Additional changes recommended by Meketa include: lowering the growth assets target to 47% from 53.1%; increasing the credit target to 12% from 7.3%; and raising the real assets and inflation hedges target to 17% from 12.1%.
New York State Common Retirement Fund (NY Common) has made two follow-on commitments totaling $500 million. NY Common committed $300 million to Prologis Targeted U.S. Logistics Fund, with an initial commitment of $300 million made last year. The public pension also committed $200 million to Blackstone Property Partners, an open-end fund targeting core-plus multi-family, retail, office and industrial properties in the U.S., following up on an initial commitment of $500 made in September 2015. The $209 billion public pension fund currently allocates 6.5% to real estate, below its 10% target.
Teacher Retirement System of Texas (Texas Teachers) committed $150 million to Invesco Real Estate’s value-add fund. Invesco US Value-Add Fund V is seeking $1 billion in capital commitments to invest in U.S. apartments, offices, industrial and retail properties that need recapitalization, renovation and re-tenanting, as well as development projects. Texas Teachers committed an additional $50 million to a co-investment vehicle. The $146 billion public pension maintains a 14% target allocation to real estate.