Blueprint: Brookfield’s quick spending, Prologis’s pursuit of Duke, EQT Exeter’s bet on beds

Brookfield is deploying as quickly as it can raise, Prologis fails to woo Duke, EQT Exeter expands its residential reach and more in today's briefing, exclusively for our valued subscribers.

They said it

“The development of life sciences requires suitable real estate that meets the technical needs and uses of a community. Real estate in France today is not designed with this in mind”

Aude Landy-Berkowitz, executive director at Paris-based developer Novaxia, justifies the firm’s €1 billion partnership with Oxford Properties Group

What’s new?

Spending spree: Toronto-based Brookfield has deployed $10 billion from its flagship global opportunity fund series in Q1. The fund’s capital raising has reached $12 billion so far

Money in, money out
Brookfield is spending money almost as quickly as it can raise it. During the Toronto-based mega-manager’s Q1 earnings call last week, CEO Bruce Flatt told investors it has closed on $12 billion so far for its latest flagship real estate fund, Brookfield Strategic Real Estate Partners IV. The fund is the biggest currently open for commitments in the private real estate market this year, with an overall fundraising target of $17 billion. Brookfield has deployed $10 billion from the fund – all in Q1.

It is not stopping either, announcing on May 6  it had purchased Watermark, a US hospitality REIT, for $3.8 billion from a combination of its funds. “We just continue to invest that fund,” Flatt said, adding that when the fund closes and is deployed, Brookfield will be quickly back fundraising again.

Unreciprocated affection (so far)
Prologis continues to court Duke Realty Corporation, the largest logistics real estate investment trust in the US. But the Indianapolis-based specialist keeps rejecting the San Francisco-based logistics giant’s advances. Prologis’s latest offer for Duke was just shy of $24 billion, which would have made it the largest private real estate transaction ever.

The signs are it will not give up, given it has been attempting to buy the portfolio since November. Duke Realty, however, rejected last week’s bid, calling it “insufficient.” While the true size of the bid has continued to increase, Prologis has not moved from its 0.466 exchange ratio, the same as the initial November offer. Until it does, analysts believe it unlikely there will be wedding bells.

EQT Exeter adds beds to its sheds
EQT Exeter’s buying spree continues. Less than two months after Swedish private equity firm EQT announced its €6.8 billion purchase of Hong Kong-based private equity firm Baring Private Equity Asia – which will merge the real estate businesses of both firms – EQT Exeter is continuing its global expansion in the US.

EQT Exeter has agreed to acquire Redwood Capital Group, a Chicago-based residential-focused manager. Although the firm is best known for its industrial investments, “expanding our multifamily offering is a crucial step in our growth,” Ward Fitzgerald, the business’s head, noted in the deal announcement.

The Redwood acquisition, scheduled to close by Q3 2022, will not add any assets under management to EQT on closing. However, the deal is expected to increase the firm’s multifamily allocation over time, with an intended portfolio sector breakdown of 65 percent sheds, 25 percent beds and 10 percent meds in the near future.

Trending topics

Early impact
As the industry thinks about how to benchmark ESG KPIs, managers continue to figure out how they can make an impact. Nuveen Real Estate is literally getting in early. A new sector in the London-headquartered manager’s business is investments in community projects in the early stages, according to a statement. The hope is that a holistic approach to investments will have an impact on individual tenants and the surrounding areas they live in without compromising on returns.

“We are going beyond just affordable housing to focus our attention on community revitalization,” newly promoted global head of impact investment and co-head of the new initiative Nadir Settles [his LinkedIn profile here], said. Settles will oversee the global impact business sector with senior portfolio manager of impact investments Pamela West [her LinkedIn profile here].

Vision made of wood
A crusade to make cross-laminated timber construction a staple of commercial real estate development has taken a step forward with the launch of ICAWOOD 2 by French manager ICAMAP. As PERE revealed today, the Paris-based firm is planning to raise €1 billion to expand a strategy that already collected €750 million from institutions including Ivanhoé Cambridge and Allianz Real Estate in 2019.

With ICAWOOD 1 now beyond the 70 percent deployed mark, marketing has begun for the successor vehicle, which will expand the firm’s remit beyond Paris offices to multiple countries and multiple sectors. Investors in the vehicle will be able to improve their carbon footprint, committing to large, open-floor, high-ceiling constructs replete with outdoor space and greenery. Critically, carbon-low materials will be used and properties developed using low-emitting techniques. Certain other managers share ICAMAP’s vision made of wood. One notable example is Australian manager Cromwell Property Group, which last year started an open-end wooden building fund in a joint venture with specialist Dasos Capital.

Investment surge ‘temporary’
There are plenty of reasons for private real estate investors to be cautious when committing capital to the market these days, including global inflation, the removal of fiscal stimulus, supply chain issues and the conflict between Russia and Ukraine. Yet, as CBRE’s Q1 Global Investment Brief demonstrates, none of that has stopped surging investment volumes.

In Q1, global commercial real estate investment grew 34 percent to $282 billion, the broker reports, with investment jumping by 47 percent in the Americas and 25 percent in Europe. Notably, volumes only grew 5 percent in Asia, muted by lower office investment. While noting the growth, CBRE dampened any optimism by predicting the macroeconomic and geopolitical factors mentioned should mean full year volumes fall short of last year’s record by about 2 percent, despite the best start to a year since 2011.

Data snapshot

Change is gonna come
Almost 40 percent of cities in North America and Europe have set ambitious net-zero carbon emissions targets, according to Savills’ latest impact report. In both regions, more than half of cities have some form of regulation, meaning repurposing and development opportunities in the region should be abundant.

People move

New hire, new strategy
Private credit manager Monroe Capital has hired real estate and private equity veteran Gila Cohen [her LinkedIn profile here] to drive the launch of a dedicated real estate strategy. Cohen, who was previously chief investment strategy officer at Japanese bank Mitsubishi UFJ Financial Group, will be head of global institutional partnerships, a newly created role.

In addition to working with other senior Monroe executives on the capital raising, deal sourcing and structuring of the new strategy, she will also be in charge of forming partnerships with large institutional investors across the Chicago-based firm’s businesses. PERE understands the plan to launch a dedicated real estate strategy was driven by Monroe’s strong dealflow in the space and the increased need among asset owners for capital partners. Check out our coverage here.

Investor watch

This week’s investor meetings

Wednesday, May 18

Thursday, May 19

Friday, May 20

Today’s letter was prepared by Peter Benson, with Jonathan BrasseEvelyn Lee, Christie Ou contributing