Insights

KAP’s insights on private equity investor relations and fundraising

Welcome back to the weekly Re-KAP where we round up market and LP news from the RE PE marketplace (Dec. 13, 2017)

MARKET NEWS

SEC to Focus on Retail Investors in 2018. According to law firm Proskauer’s 2017 Annual Review, the newly appointed SEC Chairman Jay Clayton has outlined high-level guiding principles for the agency which include (i) ensuring protections for retail investors, (ii) positioning the SEC as a regulator which is able to evolve on pace with industry, and (iii) taking a more measured and effects-focused approach to rulemaking. The Proskauer report also described the typical exam format taken by the SEC this year. Fund advisors are subject to one-week on-site visits for inspection, with two weeks’ advance notice and a two or three-hour introductory call from the SEC. Following an on-site visit, the regulator sends queries for firms to answer for a period of up to six months.

The Institutional Limited Partners Association (ILPA) released a model subscription agreement (MSA) for private equity funds. This latest fund document template reflects the organization’s ongoing efforts to streamline fundraising, increase clarity and improve the efficiency of capital formation.  

Read more on the KAP Blog about why you should embrace your Chief Compliance Officer!

CAPITAL RAISING UPDATES

TH Real Estate has raised $111 million for U.S. Strategic Industrial Fund. The fund launched earlier this year with a $600 million target. It will invest in industrial assets throughout the U.S.

According to Institutional Real Estate Inc.’s latest Fund Tracker Trend Watch, fundraising totals continue to pull back. Year-to-date 2017 data finds that funds holding final closings have raised about $75 billion. This is $10 billion less than had been raised by this time last year. IREI notes that mega-funds are still dominating the landscape, and it is the decrease in capital raised by these funds that has had a significant impact on the overall capital raised for 2017 (see chart below).

 

PEOPLE MOVES

Laurie Gollub was named Chief Operations Officer of Square Mile Capital. Prior to joining Square Mile, she held leadership positions at HFZ Capital Group, Africa Israel USA and Forest City Ratner Companies. She will bring more than 25 years of extensive experience in the industry to Square Mile when she officially joins the firm on Jan. 8, 2018.

LIMITED PARTNER NEWS

  • Iowa Public Employees Retirement System (IPERS) plans to commit up to $150 million to private real estate debt strategies in 2018. According to the public pension’s Investment Policy, real estate falls under their real assets mandate, and must constitute at least 70% of the portfolio. Of this, they are targeting an 80/20 split of core and non-core investments. IPERS maintains a target allocation to real estate of 8%.
  • Missouri Local Government Employees Retirement System (LAGERS) has committed $60 million to Noble Hospitality Fund IV, which focuses on compact full service and premium select service hotels across the U.S. As of November 2017, the fund reached a second close on $144 million of its $240 million target. The $7 billion public pension has a current allocation to real estate of 7.7%, above its 5% target.
  • San Bernardino County Employees Retirement Association (SBCERA) is reviewing the 2018 real estate pacing plan set forth by their consultant, NEPC. SBCERA has a target allocation of 9% to real estate, including a sub-strategy target minimum allocation of 50% to core private real estate and 30% to non-core private real estate. NEPC recommends that between 2018 and 2020 the public pension commits approximately $160 million to real estate (minimum of $60 million to core private real estate to maintain total core exposure above 50% and up to $100 million to non-core private real estate.) They also suggest SBCERA considers real estate debt within the “core allocation” given late cycle and high valuation entry points into core real estate.
  • Alaska Retirement recently reviewed their FY 2018 strategy for real assets. As of September 30, their real assets portfolio, which includes real estate investments, was in line with its target of 17.1%. Their real estate portfolio consists of three separate accounts, two open-ended funds, 15 closed-end funds, and an internally managed REIT portfolio. According to Chris Cunningham of Townsend Group, the real estate portfolio value is about the same as it was last year, at approximately $1.8 billion, which includes distributed income back to the plan of $80 million. Within the real assets portfolio, real estate is slightly over the target allocation.
  • New Mexico State Educational Retirement Board (NMERB) has committed $50 million to Raith Real Estate Fund II, which will invest in distressed debt backed by commercial real estate mainly in the U.S. The $12.6 billion public pension fund currently allocates 7.10% to real estate, above its target of 7%.
  •