Blueprint: Brookfield’s fifth global fundraise, ESR’s maiden Thailand investments, Tishman Speyer’s APAC family office fund

Brookfield's next global fundraising effort kicks off with the Toronto-based manager eyeing a "tremendous vintage"; ESR enters Thailand with local developer; Tishman Speyer adds to the growing list of private wealth ventures in Asia; and more in today's briefing, exclusively for our valued subscribers.

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They said it

“In the next 10 years, the main driver of outperformance in European real estate is going to be ESG.”

Christine Fritz, PGIM Real Estate executive director and co-portfolio manager, addresses members during ESG day at PERE‘s Network Europe Forum last week, adding there is a pricing difference already emerging in assets.

What’s new?

Tremendous vintage ahoy
Mere months ago, the second most prolific private real estate fundraiser was celebrating the close of its fourth flagship global opportunity fund, the largest real estate fund to close in 2022. Toronto-based Brookfield Asset Management is back in the market with Brookfield Strategic Real Estate Partners V, according to an announcement on the manager’s Q1 2023 earnings call last week. No fundraising target was publicized but the firm is expecting a first close in the second half of the year. The fourth fund was closed with $17 billion in capital commitments. Read more about that fund here.

Chief financial officer Bahir Manios said on the call the objective of re-entering the market fast was to invest into a market “we believe should provide significant opportunities to invest at highly attractive risk-adjusted returns.” When asked about the negative sentiment surrounding the asset class currently, chief executive Bruce Flatt said it was “completely unfair,” adding the scale of the firm’s portfolio allows it to see high-quality opportunities versus commodity properties. “We believe, and it sounds like our LPs believe, that this could be a tremendous vintage for us,” Flatt said.

ESR sees growth in Thailand
ESR‘s growth in the Asia-Pacific region has extended to a logistics joint venture in another territory. The Hong Kong-based firm opened its first office in Thailand and is planning to invest at least $1 billion in the country over the next five years via a partnership with Asia Industrial Estate, a Thai developer. The pair’s first two investments are an industrial estate in port city Laem Chabang and another estate close to Suvarnabhumi airport. The pair of projects represent a capital investment of $235 million, according to a release. Jai Mirpuri, country head, Singapore (development) and Thailand at ESR, believes Thailand is an important component of ESR’s strategy as the second largest economy in Southeast Asia. He predicts the country will become a “value-based economy” focused on sectors including e-commerce, logistics, automotive and digital

Tishman’s family affair
New York-based manager Tishman Speyer has partnered with Asia multifamily office Raffles Family Office to invest in Asia-Pacific real estate at a time when a growing portion of private wealth capital is looking to expand its exposure to private real estate. The two organizations launched Tishman Speyer/Raffles Family Office APAC Opportunity Fund I, targeting value-add and opportunistic investments across the region, according to a statement. Chi-man Kwan, group chief executive officer and co-founder of Raffles Family Office, said family offices have been able to capitalize on current financing issues in the market to gain controlling positions in assets at attractive prices.

Tishman Speyer and Raffles’ partnership continues a trend of large institutions partnering with Asian family offices. In another example, Ascent Real Estate, a firm spun out of New York-based Carlyle Group, formed a joint venture with Hong Kong-based family office Chow Too Fook Enterprises last month, PERE exclusively reported.

Striking out alone
As the world’s largest commercial landlord with $332 billion in assets under management, Blackstone‘s Real Estate is a business where few senior managing directors leave. That is why the departure of Tyler Henritze, head of strategic investments for Blackstone’s Americas real estate business, stands out. He is making an exit at the end of June. Henritze, who executed some of Blackstone’s biggest US real estate deals over his 19-year tenure, is leaving to start his own firm.

Blackstone is not alone in terms of recent high-profile departures. His follows Zach Vaughan, who left Brookfield Asset Management earlier this year to pursue an “entrepreneurial opportunity.”  Executives’ decisions to strike out on their own often result from “some combination of cycle timing, a desire to do something different, changing personal priorities and a lower opportunity cost of walking away,” another former top executive-turned-entrepreneur told PERE. For more details on Henritze’s departure and how his tenure compares with that of other senior managing directors at Blackstone Real Estate, read our story here.

Say hi at ULI

PERE is at the Urban Land Institute’s Spring Meeting in Toronto. Senior reporter Peter Benson is on the ground meeting with some of the industry’s biggest names on the investor and manager side, including Hines, Blackstone, California State Teachers’ Retirement System, Oxford Properties, QuadReal, and others. Email Peter if you would like to connect while there.

Trending topics

Bottom’s up
PERE Europe 2023 has wrapped and so must our coverage. And while market sentiment at the three-day event in London was unquestionably downbeat, let us leave you with a takeaway of optimism: market bottoms called. As PERE reported, Jessica Hardman, head of European portfolio management and the UK real estate group at German manager DWS, said urban logistics may be one sector to have found a floor. She cited CBRE’s UK Monthly Index, which showed total returns for industrial were up 1 percent in April and 1.7 percent in March. “I appreciate this is a bumpy road…but I think that is somewhere where we would place capital today if we could find enough stock to do so,” she said.

Another panelist, Jay Kwan, managing director at Canadian manager QuadReal, called the bottom on UK industrial. “At 150 to 200 basis points cap rate expansion for prime UK, a 5.5 percent yield today is roughly the cost of financing for stabilized kit, so you don’t have negative leverage. You get to look at that and say, ‘Mmaybe we swung too far.’”

And Sophie van Oosterom, global head of real estate at London-based asset manager Schroders Capital made similar remarks about hotels: “Coming out of covid, we’ve seen the biggest recovery actually in the top line to happen there, which immediately fell to the bottom line.” She also sees the bottom in some European markets for core offices with “the right sustainability credentials.”

Swedish junk
Who called the Nordics real estate market a safe haven for investing? With hedge funds now shorting real estate stocks in the region’s biggest market of Sweden, as per the Financial Times, signs are mounting for a reassessment of that tag. Rating agency S&P agrees. It has downgraded the credit of one of the Swedish market’s biggest firms, SBB, to junk after the indebted business saw its shares plummet to SKr6.7 ($0.65; €0.59), 73 percent down on their year-high valuation.

Claus Mathisen, chief executive officer of Urban Partners, which manages businesses including manager NREP, thinks SBB was a predictable first business to find itself in trouble owing to a lack of links to the “Swedish real estate society” to call upon for help. But he thinks others will need to find solutions to debt problems too: “The problem is they financed themselves with relatively short-term, non-institutional capital to a very high level,” Mathisen told PERE. “That capital source dried up when the interest rate environment moved from low to high interest rates. So that funding source needs to be recapitalized.”

Data snapshot

Construction costs complicate math
Construction costs across asset classes have sharply risen, according to a presentation from Rob Rackind, global head of real estate at Credit Suisse at PERE Europe last week. That steep rise is going to make attaining higher returns more difficult, he contended. Read more on higher return expectations here.

People

abrdn head downsizes
Neil Slater [his LinkedIn here] has been appointed chief executive officer of Amsterdam-based manager Redevco. On October 1, he will take over from Andrew Vaughan [his LinkedIn here], who steps down after more than 20 years at the urban regeneration specialist, and almost 12 years as CEO. Slater joins from abrdn, the Edinburgh-headquartered asset management firm, where he was global head of real assets and real estate. He was previously the CEO and representative director of the firm’s Japanese business, having moved to Tokyo in 2015 to establish an investment management presence in the country.

With around €9.7 billion in total assets, Redevco is a somewhat smaller business. The firm invests in residential, office, retail and leisure assets located in European cities. According to a statement shared by parent company COFRA Holding, Vaughan was responsible for diversifying the firm’s investment strategy and introducing third-party capital to its activities. He also led the acquisition of German retail warehouse firm redos in April 2022. Redevco invests via separate accounts, partnerships, platform acquisitions and commingled funds.

LP watch

LACERA seeks sales help
Los Angeles County Employees Retirement Association is seeking brokerage services to dispose of between $6 billion and $7 billion in gross asset value of real estate assets, according to public documents. The Pasadena-based investor opted to pivot away from direct investing to more commingled funds in January and appointed StepStone as adviser for the process. StepStone will also be advising on the selection of brokers, of which LACERA can employ up to three. Employing specialist brokers is expected to lower negotiated brokerage costs or foster opportunities for sales, also reducing costs, James Rice, principal investment officer at LACERA, told PERE via email. The investor plans to funnel the capital from sales to core and core-plus funds, Rice added.

This week’s investor meetings

Tuesday, May 16

Wednesday, May 17

Thursday, May 18

Friday, May 19

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