Blueprint: Crow Holdings Capital’s record fundraising, CDPQ’s real estate performance dips with the market, private fund investment period extensions to trend

Crow Holdings Capital's $3.1 billion fundraising for its 10th value-add fund is evidence investors' fear of missing out is outweighing their fear of a GFC-style repeat; Ivanhoé Cambridge parent CDPQ sees its portfolio-wide performance dragged down by its real estate investments; fund formation lawyers tell PERE how investment period extensions are becoming normal in the current capital market; and more in today's briefing, exclusively for our valued subscribers.

-

They said it

“The interconnectivity between banks and the real estate market is going to continue for the next couple of years, and you’re going to see more of this consolidation and/or liquidation of US banks”  

Joshua Pack, co-chief executive officer of Fortress Investment Group, speaking on Bloomberg’s Credit Edge podcast last week.

What’s new

Bob McClain Crow Holdings Capital

Nerves beaten by hopes

Amid talk of today’s tough fundraising environment, another manager has closed on its biggest fund yet. Dallas-based Crow Holdings Capital closed the 10th iteration in its flagship fund series on $3.1 billion of commitments, the firm announced last week. The haul marks a 35 percent increase on its predecessor fund, with some 70 percent of previous fund investors returning. “In my 36 years in real estate, it was the most difficult fundraising environment ever – nearly every person you would meet was nervous,” Crow Holdings Capital chief executive officer Bob McClain said of Crow Holdings Realty Partners X. Ultimately, the capital came – and in droves – making the value-add US multifamily and industrial property-focused vehicle the biggest yet for the firm. By McClain’s reckoning, the opportunity to access these asset types at today’s pricing was too compelling. “About midway through the fundraising, people started feeling like this is going to be similar to after the GFC – that there is going to be tremendous opportunity.” Read more in PERE‘s analysis.

Sinking with the rest

Even the most robust of institutional real estate portfolios was unlikely to escape the market-wide malaise of 2023. So it was with the portfolio of Caisse de dépôt et placement du Québec, the institutional investor responsible for several public pension plans and insurance programs in Quebec. As per the investor’s 2023 earnings, published February 22, the C$45.6 billion ($33.73 billion; €31.08 billion) of real estate on its books returned -6.2 percent in the year, reversing two consecutive years of benchmark-beating performance [more on how that happened here]. According to a statement: “Impacted by the same economic factors, the real estate portfolio – which posted the best return in 2022 – also had to contend with structural trends in its industry.” The year’s return still beat the Caisse’s one-year benchmark of -10 percent, accredited in part to “acquisitions in promising sectors of the future aligned with the portfolio’s evolution, as well as disciplined dispositions.” Nonetheless, the real estate return was a dark spot in an overarchingly positive picture painted for the year by the investor: its portfolio-wide 7.2 percent one-year return was in line with its benchmark target of 7.3 percent and its total assets grew to C$434 billion.

Live from Shangri-La

The PERE Network Asia Summit 2024 – our largest conference and the biggest property event in the region – kicks off in Singapore today. More than 600 members, including 200-plus investors, are expected to gather at the Shangri-La Singapore for three days of networking and in-depth industry conversations. The event will include half a dozen investor panels featuring many of the world’s largest capital allocators in real estate, among them GIC Private Limited, Qatar Investment Authority and Assicurazioni Generali. Look out for PERE editor Evelyn Lee and senior reporter Christie Ou making multiple onstage appearances, including one-on-one interviews with François Trausch, chief executive and chief investment officer at PIMCO Real Estate, and Ryan Cotton, head of Bain Capital Real Estate. Check out the full conference agenda here and look out for coverage from the conference over the coming days.

Trending topics

Co-living down under

Hospitality specialist Pro-invest Group will launch its debut co-living platform Pro-invest Co-living next month as it expands into the residential sector. Similar to the group’s hotel strategy, the new platform targets value-add returns from its investments by converting existing hospitality assets into co-living properties, according to a PERE report. Assets acquired are expected to be located in central business districts and suburban locations in Australia where tenants are looking for smaller and more self-contained apartments with high-quality facilities. The firm has already identified the first seed asset and is actively talking to both domestic and international investors to raise capital. While the co-living platform will start with investments in Australia, Pro-invest will consider expanding the platform into Asia in the future. “We see real opportunity in converting existing hospitality assets into co-living properties because these assets will yield sooner – and that’s what investors are looking for right now in this space,” said Sabine Schaffer, managing partner at Pro-invest Group.

Where managers fear to flex

More managers approaching the tail-end of a fund’s investment period with significant capital yet to draw down are seeking extensions from their investors. Lawyers in the US and Europe PERE spoke with are seeing more such requests filter in, and expect the trend to gather momentum as the year progresses. But while a longer investment period alone may encounter few objections, any subsequent extension of the fund term – which is a strong likelihood for a lot of managers, according to Kieran Saunders, partner and co-leader of the corporate real estate and funds team at law firm BCLP – will test alignment between managers and investors given the impact on IRRs and fees. Managers currently in investment periods are, therefore, likely to defer any extension to the fund term until they arrive at the back end of a fund’s life. But today’s highly illiquid exit environment will provide little comfort that such an outcome can be avoided.

Building beyond taper

Self-storage in the US experienced a major boom during the pandemic. But while supply is on the up through this year and next, it is expected to taper off in 2026. Rents and development have come back down to earth, but there is still demand according to Hines, which revealed on February 22 plans for two new facilities in the Dallas-Fort Worth part of Texas. “These latest additions to our DFW self-storage portfolio are a direct response to the growing demand for Class A, accessible storage solutions in these high barrier markets,” Robb DeJean, managing director at Hines, said in a statement. Later this year, the Houston-based manager – which ranked 13th on the latest PERE 100 ranking after raising more than $13 billion for its funds over the last five years – plans to open Custer Self-Storage in Frisco spanning nearly 77,000 net rentable square feet across two stories. It will also open Jupiter Self-Storage in Garland, which is set to feature a single-story building and a three-story building, with 90,650 net rentable square feet in total.

Data snapshot

Ending on a low

European commercial property values fell by 16.1 percent in the 18 months to the end of 2023, according to research by analytics and advisory firm Altus Group. Despite price declines tempering in Q1 and Q2 2023 after a precipitous decline at the end of 2022, Q4 2023 represented the most pronounced write-down of any quarter of last year – values fell another 3.36 percent.

People

A credit-flavored homecoming

Isabelle Brennan is leaving manager CRBE Investment Management for rival LaSalle Investment Management, joining as its first credit and global solutions product specialist. This newly created role, which Brennan will begin in May, forms part of LaSalle’s aim to diversify its investment products. She is also joining the firm’s investor relations management board, reporting to Samer Honein, who himself stepped into the newly created role of global head of investor relations in 2022. At CBRE, Brennan was a senior director in the client solutions team, and she had previously worked at LaSalle in a capital raising, relationship management and product manager role for its EMEA credit strategies. “Isabelle’s return to LaSalle will provide a significant boost to the Investor Relations team. She brings a wealth of credit and client solutions experience and is well-placed to provide deep-rooted insights to facilitate client access to real estate credit and indirect investments,” Honein said.

Investor watch

Opportunistic Oklahoma

The board of Oklahoma Teachers’ Retirement System met last week and approved two commitments to large, brand-name managers raising diversified, opportunistic real estate funds. The $21.8 billion AUM public pension fund will invest $100 million in Starwood Distressed Opportunity Fund XIII, according to investor documents. Miami-based manager Starwood Capital is aiming to raise $10 billion for its 13th global opportunity fund, and expects to hold a first close at the end of March. The fund has a target net IRR of 14 percent and will target distressed opportunities primarily across the US and Europe. Oklahoma Teachers’ will direct another $100 million to KKR Real Estate Partners Americas IV, for which New York-based manager KKR held a first close in November 2023. The fund has a target size of $4 billion and a target net IRR of 12 percent, and is expected to invest in industrial, rental housing and self-storage across the US.

This week’s investor meetings

Tuesday, 27 February

Wednesday, February 28

Thursday, February 29

Friday, March 1

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