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. 20, 2017)

MARKET NEWS

Pension Funds Lower CRE Returns Outlook for 2018-2019. Members of the Pension Real Estate Association (PREA) revealed they expect lower returns on commercial real estate investments in 2018 than they will achieve this year. Respondents to a survey described in the Q4 2017 PREA Consensus Forecast (available to members) anticipate earning a 5.6% total return for all property types on the NCREIF Property Index, 1.4% lower than total returns anticipated for 2017 (see chart below). Lower returns are expected to be driven by a slowdown in appreciation rather than property incomes.

CAPITAL RAISING UPDATES

Beacon Capital Partners launched a new value-added fund, Beacon Strategic Capital Partners 8. The firm has raised more than $12 billion of capital across eight vehicles since 1988. The predecessor fund raised just over $1 billion.

LaSalle Investment Management has launched its first Canada-focused open-end real estate fund. LaSalle Canada Property Fund (LCPF) will target core properties in major markets across Canada. LCPF has been seeded with a core portfolio of assets including industrial and multifamily assets located in top Canadian cities including Vancouver, Toronto and Ottawa.

SC Capital Partners has raised $383 million to date for its Real Estate Capital Asia Partners V Fund. The fund is targeting opportunistic investments across Asia-Pacific.

GreenOak Europe Secured Lending Fund has held a final close at €600 million, exceeding its initial target of €500 million. The fund will pursue its strategy of providing senior debt to real estate sector in Western Europe.

DRC Capital has reached its £600m hard cap for its latest real estate debt fund. The London-based firm exceeded its £500m target for DRC European Real Estate Debt Fund III. The fund will make mezzanine and whole loan investments across the UK and Western Europe in all major commercial real estate asset classes.

LIMITED PARTNER NEWS

  • Texas County and District Retirement System (TCDRS) has committed $100 million to BPE Asia Real Estate Fund II. The closed-end vehicle will target debt, opportunistic and value-added investments in Asia. The fund reached a first-close on $488 million of their $750 million target in December. The $28.6 billion public pension currently allocates 4.83% to real estate, below its 9% target.
  • Employees Retirement System of the State of Hawaii (Hawaii ERS) has committed $60 million to KKR Real Estate Partners Americas II, an opportunistic fund focused on investments in the U.S. The $15.6 billion public pension has a 5.5% allocation to real estate, meeting its target.
  • Oklahoma Teachers Retirement System has committed to two private real estate funds. The $13.8 billion public pension fund has committed up to $60 million to Dune Real Estate Fund IV and $60 million to GreenOak US III. Dune Fund IV is an opportunistic fund that will focus on distressed situations and deep value-add opportunities across the U.S. GreenOak US III is a value-add fund that will primarily target office and multifamily properties across the U.S. Oklahoma Teachers maintains a 6.05% allocation to real estate, below its 9% target.
  • State of Connecticut Retirement Plans and Trust Funds has committed up to $75 million to Crow Holdings Realty Partners VIII. The fund will focus on acquiring and renovating / repositioning core and non-core real estate properties across the U.S. The $32.4 billion public pension currently allocates 6.85% of its total assets to real estate, below its 7% target.
  • Pennsylvania Public School Employees’ Retirement System (PSERS) committed $150 million to Almanac Realty Securities VIII, which makes growth capital investments in public and private real estate companies. The $52.8 billion public pension allocates approximately 11.39% of its total assets to real estate, above its 11% target.
  • Los Angeles County Employees’ Retirement Association (LACERA) approved a $50 million commitment to AEW Value Investors Asia III. The fund will focus on opportunistic and value-add opportunities in retail and office in high-growth gateway cities across Asia. It is currently raising, with a target of $750 million. LACERA currently allocates 12.2% to real estate, above its 11% target.
  • San Francisco Employees’ Retirement System (SFERS) committed $50 million to Gaw Capital’s U.S. Fund III. The fund will focus on value-add investments in office and hospitality assets in various U.S. cities and has reached a first close on $250 million of its $400 million target. As of June 30, SFERS allocates 14% to real assets, below its 17% target.
  • Maryland State Retirement and Pension System is rebalancing its real estate portfolio. The $50 billion public pension fund plans to commit $200 million a year in non-core funds to help rebalance its real estate portfolio. Their real estate consultant, Townsend, suggested they reevaluate their core portfolio and REIT strategies. The public pension currently allocates 8.22% to real estate, below its 10% target.