Blueprint: Fortress’s acquisition by Middle Eastern sovereign, Urban Partners’ new conglomerate status, Brookfield’s Oz BTR venture

Fortress gets snapped up by Middle Eastern sovereign wealth fund Mubadala Investment Company, Urban Partners receives initial test of its strategic restructuring from investors, Brookfield expands into Australian residential with BTR deal; and more in today's briefing, exclusively for our valued subscribers.

They said it

“Commercial real estate will benefit from a resolution, as will other markets. If a default does happen, commercial real estate will be subject to further instability”

Joseph Iacono, CEO and managing partner of New York-based real estate debt specialist Crescit Capital Strategies, told PERE regarding the impact of a US debt ceiling resolution on the commercial real estate market.

What’s new?

Fortress goes sovereign
Softbank’s $3.3 billion acquisition of New York-based private markets business Fortress Investment Group in 2017 still feels fresh in the memory. But that has not stopped the Japanese investment management giant from calling time on the outlay – even potentially booking a loss – after agreeing to offload the firm to Middle Eastern sovereign wealth investor Mubadala Investment Company. The deal, which was announced last week, was struck for an undisclosed price. However, the Financial Times reported (paywall) a figure could crystallize at close to $3 billion. What does the state investor inherit via the transaction? About $46 billion in assets under management for starters, including long-standing credit operations built up by high-profile investment veteran Peter Briger, who becomes Fortress’s chairman upon the deal’s completion.

PERE has interviewed Briger and senior colleagues on a couple of occasions. Read one of those interviews here. Our reading of Fortress, then? Beyond its credit prowess, this is a firm willing and able to operate in messy, complex, even litigious distressed scenarios. In other words, a business that should be of most relevance in today’s market. Evidently, Mubadala thinks so too.

A new kind of conglomerate
Top executives at Urban Partners might not have loved their freshly minted umbrella company being described by PERE last week as a conglomerate, given some old-fashioned associations with the term. But as the firm’s CEO Claus Mathisen explained, this version is expected to offer something stickier:

a group of businesses thematically glued – to use his expression – around the concept of improving cities. “[Conglomerates] were industrial and were there to build what was needed,” Mathisen said. By his reckoning, Urban Partners will serve such needs today. However Urban Partners is classified, investors are evidently not put off with the strategic restructuring going on at the Copenhagen-based firm. Last Thursday, NREP, now one of four businesses comprising Urban Partners, closed on €3.4 billion for its latest Nordics investment fund – another Nordic fundraising record as well as a European record for capital raised for a value-add strategy. Stay tuned to see what the market makes of this ‘new era’ conglomerate, but if that fundraising is anything to go by, it is a case of getting off to a strong start.

BTR Down Under
Toronto-based Brookfield Asset Management has launched a build-to-rent platform in Australia, marking its first multifamily deal in the country. Previously focused on office, retail and industrial in Australia, the manager has lodged a development application for a dual tower build-to-rent project in Brisbane. The development is projected to be worth A$400 million ($261 million; €243 million). Sophie Fallman, the firm’s managing partner and head of Australia real estate, sees housing and affordability as key investment themes for Brookfield globally and notes “compelling tailwinds” for these strategies in Australia as well. The firm has built $18 billion of total assets under management across the US, Europe, Brazil and China for its global multifamily platform since the business’s launch in 2010.

Trending topics

Ltd supply
The housing shortage in the US is acute – the latest estimate has the country short 6.5 million homes – and Charleston, South Carolina-based Greystar is looking to develop assets to help close the gap. To do that, the firm has launched Ltd, its attainable housing brand. Through Ltd, the firm is partnering with its recently launched modular construction business, Modern Living Solutions, to provide “prefabricated modular apartments sustainably and at an attainable price point,” according to an announcement. “For our impact initiative, Greystar is aiming to build new communities that generate returns while ensuring an affordable rent check” for workers, Kevin Scelfo, managing director of portfolio management at Greystar. The firm is currently funding projects via balance sheet capital, PERE understands, with no formal plans for dedicated capital at this time.

Areim’s data center expansion
Nordics manager and developer Areim has closed on its first sector-specific fund, just months after it raised its largest diversified fund ever. The Helsinki-based firm raised €446 million for Areim DC Fund for which the capital will be used to invest in data centers. Areim is transferring its majority ownership interest in EcoDataCenter, a platform focused on “climate positive” data centers, to the fund, according to an announcement. “With our newly established fund, we have the opportunity to support the green transition within the industry,” Therese Norling, fund manager, said.

Data snapshot

A cool down in logistics
CBRE’s Q1 2023 Asia Pacific Cap Rate Survey has shown that interest in the logistics sector has dropped significantly in the region. The percentage of respondents that reported increased queries about institutional-grade modern logistics and traditional logistics facilities in Q1 compared to Q4 fell from 58 percent to 43 percent and 35 percent to 19 percent, respectively.

People moves

KKR diversifies C-suite
KKR is expanding and diversifying the C-suite of its real estate business. Last week, the New York-based private equity firm named Julia Butler [her LinkedIn profile here] to the newly created role of chief investment officer of its non-traded real estate investment trust, KKR Real Estate Select Trust. Butler, who is based in New York and joined KKR in 2017, is one of only three female managing directors at the firm’s real estate business, along with chief administrative officer Diana Simmons [her LinkedIn here] and Lindsey Wright [her LinkedIn here], head of investment services for the firm’s real estate credit business. With her appointment, she becomes the sole female in the real estate team in a C-suite investment role. As with other non-traded REITs from rivals like Blackstone and Starwood, KKR has seen ongoing redemption queues for KREST, with repurchase requests exceeding 5 percent of its aggregate NAV for both the Q1 2023 and Q2 2023 tender offer periods.

Investor watch

LACERS’ rebalancing act
The Los Angeles City Employees’ Retirement System is rebalancing its core portfolio and planning to commit $100 million of new capital to income-producing strategies in the next couple of years, according to public documents. The California investor is exploring options in both core and core-plus funds after pausing commitments to open-ended vehicles in 2022. However, LACERS’ consultant, The Townsend Group, recommends the investor hold off on new commitments until at least later this year as write-downs are likely to adjust values further. The investor will be looking to top-up commitments in “high-conviction managers with optimal portfolio positioning,” according to the documents, meaning those with overweight positions to apartments, industrial and alternative property sectors. Meanwhile, LACERS is redeeming out of its $30 million investment in Jamestown’s Premier Property Fund and $19 million investment in Berkshire Residential‘s Multifamily Income Realty Fund as part of its efforts to consolidate its manager list.

This week’s investor meetings
Wednesday, May 31

Thursday, June 1

Friday, June 2

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