Blueprint: Blackstone’s fundraising momentum; CalSTRS’ real estate staff shake-up, BIG’s record multifamily fundraise

Blackstone's earnings remind the market of the firm's fundraising prowess; CalSTRS' Mike DiRe is promoted, while the real estate director position remains unfilled; Bridge Investment Group raises a record multifamily fund, proving investor appetite for the asset class; and more in today's briefing, exclusively for our valued subscribers.

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They said it

“You’ll hear people say it’s driven by death, divorce and disaster, as well as other periods of change. That need base makes it very resilient”

Robert Moser, founder, principal and chief executive of Prime Group Holdings, on why he believes in self-storage in the wake of raising the largest fund ever dedicated to the asset class. Read our full coverage here

What’s new?

Jon Gray, Blackstone

Inflows not outflows

While Blackstone has spent the last few months defending its non-listed BREIT vehicle, last week’s earnings announcement offered a reminder that private real estate’s 800-pound gorilla can still continue to pack on weight. Despite a challenging market environment, the New York-based mega-manager added $2.3 billion to Blackstone Real Estate Partners X, its latest flagship global opportunistic real estate fund, bringing the total commitments to $28.6 billion. Blackstone also began raising its latest real estate debt fund, targeting a similar amount to its $8 billion predecessor, Jon Gray, president and chief operating officer, told investors during the earnings call.

That was not the last of it, with Gray adding that the manager expects to start raising its seventh European-focused real estate fund later this quarter, again aiming for a similar size to the previous fund, which closed with €9.5 billion in third-party capital. Check out our earnings coverage here.

Teachers’ pet

The overseer of the real estate portfolio of the second-largest US public pension is taking on more responsibility. Mike DiRe, who served as the director of the California State Teachers’ Retirement System‘s real estate portfolio from 2000, has been promoted to senior investment director of private markets. No one has been announced as his replacement.

In DiRe’s new role, he will expand from overseeing real estate investment for the pension fund with $302.1 billion in assets, to looking after private equity and inflation-sensitive assets, according to an announcement. Beyond portfolio management for the asset classes, DiRe will advise Scott Chan, deputy chief investment officer, on strategy and help make tactical and strategic decisions for the whole portfolio.

BIG-gest ever

While Blackstone eyes the biggest ever raise across the whole of real estate, Salt Lake City-headquartered Bridge Investment Group has reset the market on multifamily funds. The firm’s fifth multifamily-focused flagship fund, Bridge Multifamily V, has become the largest closed-end vehicle focused on the asset class.

The firm closed on $2.26 billion of capital commitments, a shade over the $2.2 billion raised by Miami-based Lennar Corporation in 2014. Jonathan Slager, BIG’s chief executive officer, told PERE in an exclusive interview that investors backed the firm based on a long-term belief in the asset class, coupled with its track record in the sector. According to an investor presentation, the firm’s fourth fund – which collected $1.6 billion in 2018 – had produced a 30.4 percent net IRR as of the end of Q3 last year. Read our full coverage here.

Sweeping up the cuttings
As private real estate prepares to hit the reset button on pricing, not all managers are bracing themselves for a haircut. Others, as evidenced by AEW’s new €375 million separate account mandate from Samsung SRA Asset Management, a wholly owned subsidiary of Korea-based investor Samsung Life Insurance, are chomping at the bit to start buying assets at a discount.

The Boston-headquartered manager will invest in “repriced” core and core-plus assets across Europe alongside other co-investors, focusing primarily on office and logistics, but also residential, according to a release seen by PERE. The announcement described the UK as “an immediate priority, as it is proving to be the quickest to reprice.”

As one commentator this week mused when asked about repricing: “The UK has certainly repriced the fastest. Whether that’s just an extension of Brexit or the mini-budget crisis, there is also just a stronger discipline within the UK market around appraisals and marking assets to market.”

Trending topics

The numbers do not lie
A widespread repricing event is officially under way. In its Q4 results released last week, US industry body NCREIF has revealed the first negative quarterly return for its NPI index since Q2 2020. Total returns fell from 0.57 percent in Q3 to negative 3.5 percent in Q4, representing the largest quarterly decline in the NPI since the global financial crisis. Approximately 70 percent of the institutionally owned US operating properties tracked by the index were written down in Q4, doubling Q3’s number.

The numbers were even worse for office, which returned negative 4.8 percent for the quarter. Ivanhoé Cambridge, the real estate subsidiary of pension fund Caisse de dépôt et placement du Québec, has already taken a hit in this area. As first reported by Commercial Observer last week, the investor took a substantial discount on its Los Angeles office building PacMutual, putting it on the market for $100 million, half the price it paid for the asset in 2015.

PERE is keeping a close eye on the industry-wide pricing reset. As it plays out in your business, reach out to Charlotte D’Souza to share your thoughts.

Rebound of retail in 2022
While the malaise of other sectors captures attention, the retail sector in the US saw one of its best years in 2022. There has been an uptick in demand, drop in availability rate, record-low deliveries of new space, continued rent growth and improvement in consumer sentiment, according to global brokerage and research firm CBRE’s Q4 2022 US retail report.

The consistent demand for retail space and little new construction throughout 2022 lowered the retail availability rate below 5 percent for the first time since CBRE began tracking it in 2005, and raised the average asking rent by 2.5 percent in the last quarter of 2022. Unsurprisingly, the neighborhood, community and strip center sector saw a stronger and more stable performance than the lifestyle and mall segment, given the latter’s well documented structural challenges.

Data snapshot

Discount rate indeed
As the global repricing takes shape, Oxford Economics’ latest analysis has found the debt markets are having a more than meaningful effect on prices. In Western markets, the 10-year forward rate has depreciated real estate values by at least 8 percent relative to pre-pandemic values.

People moves

Nuveen names new Europe real estate boss
Global manager Nuveen Real Estate has promoted its long-serving executive to the head of Europe, to lead the expansion of its real estate platform in the region. Randy Giraldo [his LinkedIn here] has been with Nuveen for nearly 15 years, and was most recently the lead portfolio manager for parent company’s TIAA Real Estate Account, with more than $30 billion in assets under management. Based in London, Giraldo will oversee the firm’s strategy and investment activities for its 12 regional offices across the continent. Nuveen’s European real estate business currently manages $24.4 billion of assets across all sectors of commercial property on behalf of 123 clients.

Nichols returns to Goldman
Formerly one of the biggest names among real estate consultants, Meagan Nichols [her LinkedIn profile here] has moved over to the manager side of the business with her new role as senior real estate strategist in the client solutions and capital markets group at Goldman Sachs Asset Management.

As part of the product strategy team, she will focus on the real estate business and product strategy, consultant relationships, strategic marketing and investment content. Before Goldman, Nicholas was head of the global real assets investment group at investment firm Cambridge Associates, where she advised pensions, private clients/family offices and sovereign wealth funds on investment portfolios ranging from $200 million to more than $30 billion. With her latest move, Nichols comes full circle, having started her career as an analyst at Goldman more than 20 years ago.

Investor watch

CPPI strengthens tie with IndoSpace
Toronto-based CPP Investments continues to grow its logistics exposure in India by becoming an anchor investor in GLP-backed IndoSpace’s new real estate fund. The investor has committed $205 million to IndoSpace Logistics Parks IV, a new fund targeting $600 million. Fresh off its first close, the fund is expected to add 25 million-30 million square feet to the IndoSpace portfolio.

CPPI and IndoSpace established their relationship in 2017, forming a joint venture to develop and acquire logistics facilities in the country. “Over the past few years, we have made numerous investments in India’s industrial space, where we see strong demand as the manufacturing sector continues to grow and the e-commerce sector matures,” Hari Krishna V, CPPI’s managing director and head of real estate in India, said in an announcement.

 

This week’s investor meetings

Tuesday, January 31

Wednesday, February 1 

Thursday, February 2

Friday, February 3

Today’s letter was prepared by Peter Benson with Evelyn Lee, Charlotte D’Souza and Christie Ou contributing