Blueprint: Goldman Sachs’ return, LaSalle’s retail splurge, ADIA’s Indian affordable opportunity

Goldman Sachs returns to real estate private equity funds, LaSalle Investment Management injects some positivity into retail, ADIA targets affordable housing in India, and more in today's briefing, exclusively for our valued subscribers.

They said it

“I don’t think all the scars from covid have shown themselves yet.”

Slate Asset Management co-founder Blair Welch tells PERE when describing the investment environment he expects the Toronto-based manager to see during the deployment of its latest fundraise. Read the full story here.

What’s new?

Goldman returns: Julian Salisbury, Goldman Sachs’ global co-head of its asset management business, is leading the investment bank’s revamped return into the space it helped create.

Whitehall Street’s back (alright)
Scholars of the institutional private real estate industry can chart the birth of the closed-end, real estate fund back to the 1990s and the US investment banks. Among the first purveyors of the private equity real estate fund model was Goldman Sachs’ Real Estate Principal Investment Area and its Whitehall Street funds. The global financial crisis put paid to their continuation. Some 14 years since the last of the series, Whitehall Street International 2008, which was closed on $2.34 billion, a new-look Goldman Sachs, with its new-look asset management division, has returned to the market with a new-look real estate equity fund. Enter the first Goldman Sachs Real Estate Investment Partners ‘program’, with $3.5 billion of capital committed from external investors, including institutions and high-net-worth individuals. PERE tipped the fund in 2019 in coverage you can read here. Notably, the fund carries a lower risk and return core-plus to value-add strategy versus Whitehall’s opportunistic wrapper. But insiders told PERE the bigger picture is the switch in dependence on the bank’s mighty balance sheet to sharing more of its strategies with external third-party capital sources. Regardless of those points, long-time market followers will note the return of one of the sector’s creators and once-dominant forces as just as significant.

Retail revival
Who says in-person apparel shopping is dead? Chicago-based LaSalle Investment Management has signaled to the market it does not think the concept is defunct in the UK with a £600 million ($765 million; €711 million) acquisition of a pair of discount fashion outlets. The assets, one in Cheshire and one in Swindon, were purchased from manager Nuveen Real Estate, which held the assets in its UK Shopping Centers Fund. McArthurGlen, the specialist developer and operator of designer outlets, will remain in place as the operator of the assets, having originally developed them and been a co-investment partner in the £365 million purchase of a portfolio by Nuveen-predecessor Henderson Global Investors in 2008. The increase in value, despite a torrid time for retail post-global financial crisis, demonstrates there may be opportunity to find compelling assets in the sector for investors yet.

Tunnel vision
Elon Musk’s The Boring Company has received the backing of two top private real estate managers that also are among the industry’s most active proptech investors. Toronto’s Brookfield Asset Management and New York-based Tishman Speyer, along with Miami-based homebuilder Lennar and developer Dacra, are among a group of real estate partners that participated in the tunneling company’s Series C funding round. The $675 million financing, led by venture capital firms Vy Capital and Sequoia Capital, now values Boring at almost $5.7 billion. The start-up is focused on building underground transportation systems in lieu of roads, which “take up an extraordinary proportion of available real estate” and occupy 20-30 percent of surface land, the company says.

Trending topics

Sites, camera, action!
The spotlight continues to shine on studio space as an institutional asset class. According to a Knight Frank report published last week, the demand for production in the UK is not being met by the around six million square feet already in the market, sparking a 45 percent increase in planning consents for studios over the last three years, the London real estate brokerage firm found. Some studios are turning away requests for space, Knight Frank said. Development of new space is being driven, in part, by US institutional capital managers. Blackstone and Los Angeles-based Hudson Pacific Properties’ formed a joint venture to develop a Broxbourne, Hertfordshire property and Culver City, California-based Hackman Capital Partners began developing the country’s largest studio in Dagenham, an area of London, in 2020. Future projects will need capital, meaning a few stars have time to make a name for themselves this series.

SF’s green spaces
San Francisco’s green building office market is proving the thesis that a focus on the environmental impact of buildings yields bigger rewards. Asking rents in the West Coast market are 45 percent higher for green buildings than the broader market, according to a report published last week from New York-based real estate advisory firm Newmark. The average asking rate of a building meeting green standards is $113.51 per square foot, a higher rate than both Singapore and Los Angeles’s average rents last year. Despite the higher rents, the 11.1 percent vacancy and availability rates in green buildings are both lower than the broader market also, proving tenants care more for sustainable office spaces than the price they pay for them.

Data snapshot

Europe rebounds
Investment volumes rebounded to the second best Q1 on record in Europe, according to data from CBRE out last week. Southern Europe led the recovery, with Spain, Italy and Portugal all growing their 2021 levels by more than 100 percent. Italy and Spain even exceed their investment volumes from the record Q1 2020.

Investor Watch

From investor to stakeholder for ADIA
Abu Dhabi Investment Authority is betting on India’s growing demand for affordable housing by acquiring a stake in HDFC Capital, the private equity investment arm of India’s largest private mortgage lender Housing Development Finance Corporation. The sovereign wealth fund will pay around 1.84 billion rupees ($24 million; €23 million) for a 10 percent stake in the manager. This is ADIA’s first time investing in a manager in the country, according to Indian newspaper The Economic TimesADIA is, however, familiar with the firm having been a primary investor in HDFC Capital’s H-CARE fund series, which provides long-term, flexible funding for affordable and mid-income housing projects. The firm also invests in technology companies adjacent to the affordable housing ecosystem in India. Mohamed AlQubaisi, executive director of real estate at ADIA, said the investment “underlines our belief in the positive long-term outlook for affordable and mid-market housing in India.”

This week’s investor meetings

Tuesday, April 26

Wednesday, April 27

Thursday, April 28

Friday, April 29

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