Insights

KAP’s insights on private equity investor relations and fundraising

 

Welcome to the Re-KAP! Each week, we’ll round up news and happenings from the real estate private equity marketplace and share them with you here.

 

MARKET NEWS

Real estate fundraising hit a slump in Q3, dropping to its lowest level since 2009. According to data recently released by PERE, managers accumulated $10.8 billion, down from $29.2 billion during the previous quarter. Opportunistic funds proved the most popular strategy, accounting for nearly a third of the capital, amassing $3.7 billion.

The overall decline in fundraising can be attributed in part to the record growth in dry powder, with many firms struggling to deploy the capital they have amassed. This should come as no surprise as a recent Preqin survey of real estate fund managers revealed that nearly 60% believe it is more difficult to source attractive investment opportunities than a year ago.

LIMITED PARTNER NEWS

  1. The Wisconsin State Investment Board (SWIB) plans to discuss its current asset allocation at this week’s investment board meeting. In August, the board communicated that SWIB’s real estate staff is being disciplined in its approach to reach the new allocation target of 8%. They are selling non-strategic assets (Detroit multifamily) at accretive pricing and acquiring strategic positions when opportunities arise. While they expect to finish 2017 at a similar exposure to 2016, Chris Levell of NEPC will offer insight this week, including a comparison of peer fund leverage. When finalized, the minutes of this meeting will be available here.

  2. The Alaska Permanent Fund recently discussed their private real estate portfolio, noting that they are currently under-allocated to the asset class by $1.1billion. The pension’s current initiatives include a discussion with a large, national RE development company to explore a potential expansion into markets outside the U.S. They continue to evaluate opportunities to add to their industrial real estate holdings, and are particularly focused on finding “last mile” distribution opportunities. They are also undergoing a search for a real estate consultant to oversee program strategy, including the valuations/appraisals process and information systems oversight.

  3.  Ann Arbor City Employees’ Retirement System, with $490 million in total plan assets, committed $8 million to Carlyle Realty Partners VIII, an opportunistic real estate fund. As of June 30 their real estate portfolio is valued at $35 million, 7% of the total plan. Their target allocation to real estate is 9%.

  4.  Kansas Public Employees Retirement System, committed up to $50 million to CBRE Strategic Partners U.S. Value 8, a value-added and opportunistic fund. The pension previously committed $40 million to CBRE’s Value 7 fund. Earlier this summer, KPERS authorized a $50 million commitment to AEW Partners Fund VIII, an opportunistic real estate fund.

  5.  Hawaii Employees’ Retirement System allocated $50 million to Torchlight Debt Opportunity Fund VI. As of March 31, the pension has 26 real estate fund commitments across 15 unique managers. Inclusive of separate accounts, their real estate portfolio has returned 8.1% net IRR.

  6.  Oklahoma Teachers’ Retirement System discussed a $60 million allocation to Starwood Global Opportunity Fund XI. The fund recently reached a second close on more than $5.5 billion of their $6 billion target.