Blueprint: Brookfield’s latest fundraising haul, PERE’s H1 investor report, Alaska Permanent Fund’s multifamily JV

Brookfield gets closer to latest mega-fund target, PERE adds SWF data to H1 investor report, Alaska Permanent Fund backs multifamily REIT in JV, and more in today's briefing, exclusively for our valued subscribers.

They said it

“They are surmising that their investors would be unhappy if they were more focused on platform realization or sales versus a laser focus on maximizing LP value.”

David Hodes, founder and co-managing partner of advisory firm Hodes Weill, on one of the reasons firms may hold off on seeking M&A opportunities in H2 2022. Full coverage here.

What’s new?

Two can play at that game: as Blackstone inches towards the largest private real estate fundraise ever, Bruce Flatt’s Brookfield is closing in on its $17 billion targeted fund.

Brookfield’s middle ground
The prospect of two double-digit funds closing this year grows ever greater. A few weeks back, Blackstone announced it was expecting to close soon on the $30 billion Blackstone Real Estate Partners X. Now Brookfield Asset Management has raised a total of $14.5 billion for its latest flagship global real estate fund, Brookfield Strategic Real Estate Partners IV, just $2.5 billion shy of its $17 billion target. The Toronto-based firm, which launched the fund in April 2021 and had raised $9 billion as of August that year, is expected to hold a final close for the vehicle this fall. During the firm’s Q2 2022 earnings call last week, Brookfield CEO Bruce Flatt noted that investors “are probably most positive” about infrastructure and renewables, while private equity “would be the hardest” in terms of fundraising. Real estate, meanwhile, is “somewhere in the middle,” because although it is cashflowing and inflation insensitive, “people are unsure” about the asset class.

PERE’s new and improved investor report
Following on from last week’s fundraising report (which you can find here), this week PERE unveils its latest first-half investor report, tracking the largest investor commitments and allocation outlooks for various types of global investors. This year sees the addition of sovereign wealth fund data, finding that more than 40 percent of the institution type increased their allocations to real estate over the first six months of 2022. SWFs were also one of two investor classes, along with insurance companies, that saw an increase in average allocations to private real estate relative to last year. For more insights on investor activity, see the full report here.

Alaska takes AIM at multifamily sector
Juneau-based Alaska Permanent Fund has backed publicly traded multifamily specialist Apartment Investment and Management Company in a joint venture comprising $400 million of equity. APF has committed $360 million with Denver-based Aimco providing the rest. The JV will look to fund up to $1 billion of residential assets in high-growth US markets, including South Florida, Washington, DC and Denver, according to a press release. The largest sovereign wealth fund in the US has a history of partnerships with public real estate investment trusts, having formed a JV with Immochan (now called Ceetrus), a French shopping center REIT, in 2014.

Trending topics

First timers club
Real estate private equity managers are on pace to raise more capital for first-time funds in 2022 than they did last year. The year-to-date total for first-time funds closed this year has reached an aggregate $1.82 billion across nine vehicles, a level close to what was raised in the entirety of 2021, $1.91 billion across eight funds. One of the latest examples is Charlotte, North Carolina-based South Street Partners, which just closed its inaugural discretionary commingled fund, more than doubling its $100 million target. The SSP GP Fund I – which will employ an opportunistic, value-add approach across multiple property types – raised $225 million in total, slightly larger than the $200 million average fund size for this year’s debut offerings. This compares with last year’s average fund size of $240 million. Read the full story here.

Lever up
An MSCI report published last week found closed-ended US real estate funds demonstrated strong performance against the MSCI US Quarterly Property Index, with this subset outperforming the index by a factor of 1.07 from inception through the end of 2021. But there is more to the metric than meets the eye, with MSCI pointing out the factor falls to 1.01 when accounting for fund specific leverage. The report digs deeper into the impact of leverage, noting 58 percent of the funds studied outperformed the unlevered index, with this number dropping to around half with leverage added in. The report also notes 72 percent of funds of 2005 to 2007 vintages were underperformers on both a levered and unlevered basis, underscoring the importance of timing on performance.

Data snapshot

Unreal rents
It’s no secret rents in office have been rising at unprecedented rates. Research from proptech firm VTS suggests some of that growth may not as real as first meets the eye. According to its latest Green Shoots report, VTS found that an average of seven months of free rent are offered on leases signed in major cities across an average lease term of 94 months. Free rental months allow base rental rates to remain high and could skew data on where rents actually sit in certain US cities.

People moves

BIG into proptech
Salt Lake City-based Bridge Investment Group has hired Jeremy Ford [his LinkedIn here] to lead its new vertical focused on proptech investment, Bridge Ventures. Ford will serve as chief investment officer, having previously worked as the head of property strategy for REEF Technology, a proptech firm focused on operating parking lots and delivery kitchen properties. He also previously worked as a managing director in Europe for The Carlyle Group. The new platform will invest in both early- and late-stage proptech firms, according to a press release, with no immediate plans to raise dedicated vehicles. Initial investment will be commitments to “industry-leading proptech funds,” the release noted.

Investor watch

APG shores up Australian real estate debt exposure
APG has doubled its investment in Australia’s real estate debt market amid a rising interest rate environment. The Dutch pension fund manager has committed a second tranche of A$600 million ($427 million; €409 million) to Melbourne-headquartered property investment manager MaxCap Group, having first committed A$300 million in 2019. The new commitment has an option to increase total commitments to the partnership to A$1.2 billion. Wayne Lasky, executive chairman of MaxCap, believes real estate debt acts as an “inflationary hedge” due to the floating rate structure of loans in Australia and the fact it plays an “increasingly important role in uncertain times.” APG’s follow-on investment comes shortly after real estate heavyweight ADIA entered the Australian real estate debt market for the first time by committing A$700 million to local manager Qualitas this month. Read affiliate title Real Estate Capital Europe‘s full coverage here.

This week’s investor meetings

Tuesday, August 16

Wednesday, August 17

Thursday, August 18

Friday, August 19

Today’s letter was prepared by Peter Benson, with Evelyn LeeSamantha RowanChristie Ou and Anna-Marie Beal contributing.