Benson Elliot has closed its fifth real estate fund on a total of €836 million, exceeding its €800 million target, PERE has learned.
The London-based private equity real estate firm launched Benson Elliot Real Estate Partners V, which had a €850 million hard-cap, in 2017, according to a filing with the Securities and Exchange Commission. By April 2018, Benson Elliot had raised €600 million in the first close for the fund, PERE previously reported.
PERE understands that Benson Elliot raised nearly all of the capital for BEREP V in 2018 but held the vehicle open until early 2019 to accommodate investors who wanted to make a commitment to the fund part of their 2019 real estate allocation.
BEREP V is the largest fund to date for Benson Elliot, which previously closed the predecessor fund in the series at €634 million. It is also the firm’s first vehicle to close since Trish Barrigan became managing partner in January 2018.
Despite the significantly larger size of BEREP V, Benson Elliot executive chairman and chief investment officer Marc Mogull said the firm turned away many investors from the start, having predetermined the amount of the fundraise based on both the opportunity set in the market and expected pace of deployment.
“Given the size of fund we were seeking to raise and the pre-commitments we had, we had limited capacity for new investors,” he said. “When you know upfront you’re not going to accommodate that investor, we say no right way. We had to be a little bit harsher than we had in the past.”
In choosing the fund’s new investors, the firm in part favored “people who’ve courted us for a long time,” Mogull said. “In terms of how we decided who to take in, it was based on who approached us and if they had done their homework, if they diligence us for a year or two, if they know us, if they’re conceptually committed in the timeframe we will afford them.”
Benson Elliot also focused on increasing its non-US investor base with the incremental capital in BEREP V, Mogull added, estimating the firm’s first fund was 75 percent US investors.
BEREP V’s limited partners comprised approximately 40 institutional investors, including university endowments, insurance companies, pension plans, sovereign wealth funds and family offices. About 40 percent of the capital came from the US and 35 percent from Europe, with the remainder from the Middle East and Asia.
Limited partners in the fund included the Arizona Public Safety Personnel Retirement System, which committed up to €50 million in April 2018.
The fund saw a 95 percent reup rate from existing investors. “Generally, investors’ commitments are getting bigger, so we had to size up the target,” Mogull said. On average, returning investors wrote checks that were 10 percent larger than those for BEREP IV.
He believed the firm’s strong track record, with a 14 percent net internal rate of return across prior funds, was one reason for the fund’s high percentage of follow-on commitments. BEREP IV, which is fully committed to 18 transactions and has returned approximately 50 percent of invested capital to date has delivered realized returns of 58 percent and a 1.9x multiple.
“When you’re delivering performance that is statistically so significantly beyond the mean, you’ve got a get a number of things right,” Mogull said. “In this case, we got the execution right and market and sector calls right.” In particular, BEREP IV had significant exposure early to both the hospitality sector and the Berlin market, both of which drove performance in the fund.
Benson Elliot closed its last BEREP IV investment on Tuesday and is now expected to commence investing the capital in BEREP V.
The firm did not use a placement agent in its capital raise.