Almanac closes eighth fund at over $2bn – Exclusive

With its latest capital raise, the New York-based private equity real estate firm has made its biggest leap in fund size in the history of the series, which launched in 1996.

Almanac Realty Investors has held a final close on its largest fund to date, Almanac Realty Securities VIII, PERE has learned. 

The New York-based private equity real estate firm raised a total of $2.26 billion for ARS VIII, comprising $1.91 billion in the main fund, along with an additional $360 million in commitments to sidecar co-investment vehicles. 

Almanac launched the fund last year with a $1.5 billion target and a $2 billion hard-cap. The firm gathered more than $537 million in the first close in February and by June, had netted $1.12 billion, filings with the Securities and Exchange Commission showed. 

The vast majority of limited partners in the fund were existing relationships, but Almanac also raised a sizable amount of capital from new investors, including foundations, corporate pension plans and sovereign wealth funds. Geographically, the capital primarily came from US investors, with some equity also sourced from Canada and Asia. US public pension plans backing the fund included the Pennsylvania Public School Employees’ Retirement System, which pledged $150 million in November; New Mexico State Investment Council, which committed $75 million in January; and Nebraska Investment Council, which agreed to invest $40 million in March, according to documents from those institutions. 

With its latest capital raise, Almanac has made its biggest leap in fund size in the history of the series, which launched in 1996. ARS VIII has attracted more than 1.5 times the amount of capital of its predecessor, which amassed a total of $1.42 billion in commitments, with $1.26 billion raised in the fund and the remainder in co-investment vehicles. That fund – which was the firm’s first to surpass the $1 billion mark – in turn was significantly larger than ARS VI, which collected $819 million plus $150 million in co-investment capital. 

“I think more and more investors see the power of investing directly into real estate companies, and the enhanced alignment with operators that approach provides,” said managing director Josh Overbay, remarking on the growth of the ARS funds. 

He added: “From an investment sourcing perspective, we are only seeing our opportunity set grow.” Previously, a real estate operator and owner only had two primary options of raising capital and expanding its business: either deal by deal in separate joint ventures, which can be inefficient, or becoming an institutional fund manager, which can be a long and difficult process. Capitalizing an operating company directly is an increasingly attractive and viable alternative, Overbay said.

With ARS VIII, Almanac will continue to pursue its strategy of investing growth capital into private and public real estate companies. To date, the firm has made one investment from the fund, allocating up to 150 million to McNeill Hotel Company, a Memphis, Tennessee-based hospitality real estate and property management company that acquires and develops limited services hotels throughout the US. 

Almanac typically makes these entity level investments in the form of convertible debt with a high current coupon of 6-9 percent. The firm is targeting an unlevered net return of 12 percent and a 1.5x-1.75x net multiple, according to a memorandum written by Cleveland-based real assets consultant Townsend to Los Angeles City Employees’ Retirement System. 

As of December 31, Almanac was reporting a net IRR of 14.1 percent and a net multiple of 1.2x for ARS VII, and a net IRR of 14.3 percent and net multiple of 1.4x for ARS VI, according to a fund presentation made by Almanac to LACERS.