Beacon Capital Partners is aiming higher with its latest value-added fund, upping the target size for the fund, PERE has learned.
The Boston-based firm, which declined to comment, launched Beacon Capital Strategic Partners VIII in May with a $1.25 billion target. Following a strong first close of $990 million in November, however, Beacon is contemplating raising the target closer to $1.5 billion. The firm set a $1.75 billion hard-cap in November.
Similar to its predecessor vehicle, BSCP VIII focuses on US office investments in urban markets, such as Boston, Los Angeles and New York. Fund leverage is capped at 60 percent loan-to-value.
BSCP VII closed in November 2015 on $1.38 billion against a $1.25 billion target, PERE previously reported. That vehicle, which is close to finishing its investment period, has acquired buildings including 85 Broad Street and 575 Fifth Avenue in New York; 515 North State Street in Chicago; 160 Federal Street in Boston; the Maritime Building in Seattle; and 400-450 North Brand Boulevard in Glendale, California. Investors in the seventh fund included the California State Teachers’ Retirement System and the State of Wisconsin Investment Board, which each allocated $150 million, per PERE data.
BSCP VIII is the first vehicle Beacon has raised without a placement agent, after creating a capital raising platform. Managing director Brent Elkins, who joined the firm in March 2016, is leading the equity raise.
The firm previously raised $2.54 billion for BSCP VI in 2008, $4.04 billion for BSCP V in 2007 and $2.03 billion for BSCP IV in 2005, according to PERE data. Beacon focused on Europe and the US for its fourth and fifth funds, changing its strategy back to target solely the US with BSCP VI.
In 2012, the Montana Board of Investments placed BSCP V on its troubled investments list. “While the manager has done a good job of trying to preserve value, suffering from the impact the recession has had on office properties, the fund is not expected to recover our cost,” the pension system noted in board meeting documents at the time. That vehicle generated a -10.7 percent net internal rate of return as of March 31, according to investor documents from the Nebraska Investment Council.
However, its more recent funds are on track for a better performance. BSCP VI has generated an 18 percent net IRR and a 1.6x multiple, according to a source familiar with the matter. The seventh fund is targeting a 13-14 percent net IRR, while the eighth funds is aiming for a 12-13 percent net IRR.
Beacon is eyeing a larger target size for BSCP VIII amid a dip in US fundraising both by volume and by funds closed, according to PERE data. With near-record valuations, managers are slowing their pace of capital deployment, New York-based placement agent Park Madison Partners said in a report this week, citing several examples of investors whose uncalled capital commitments account for over 50 percent of their private real estate allocations.
“It does make fundraising more difficult and more competitive, and we expect this to continue into 2018,” the agency said.
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