Blueprint: Goldman’s $3.6bn close, Tishman Speyer’s data center buy, prices slide in Asia

Goldman Sachs Alternatives' final close for West Street Real Estate Credit Partners IV brings it a $7 billion lending capacity; Real estate prices in developed markets in Asia are down 10 percent from their peak in 2022, creating a entry point for investors; Tishman Speyer makes its first industrial acquisition in Europe which doubles as the firm’s first data center project; and more in today's briefing, exclusively for our valued subscribers.

They said it

“You wouldn’t be able to raise another dime”

Kevin Gannon, chief executive of investment bank Robert A Stanger, speaking to the Wall Street Journal on how a redemption halt could prove “fatal’ for Starwoood Capital’s liquidity-strapped non-traded REIT.

What’s news

Goldman Sach’s fundraising: West Street Real Estate Credit Partners IV and related vehicles have $7 billion of lending capacity after closing (Source: Getty)

Goldman’s big ticket close 

Goldman Sachs Alternatives last week held the final close for West Street Real Estate Credit Partners IV, its latest real estate credit fund. With this final close of $3.6 billion, the fund and its related vehicles will have more than $7 billion of lending capacity, including leverage. Company executives told PERE the close comes a time of significant supply and demand imbalance for real estate credit. “We believe this is creating attractive opportunities for alternative lending sources that can provide size and certainty of execution to borrowers,” said Richard Spencer, chief investment officer for real estate credit at the New York-based manager. What’s more, the firm’s real estate credit offering has become an increasingly important channel to market for the bank’s institutional and wealth clients – demonstrated by the fund’s expanded investor base and increased commitments from existing clients.

The fund surpassed its target and is the largest to date in the firm’s series, according to PERE data. Read more about it here.

Asian cuts

Real estate prices in developed Asian markets are down 10 percent from the peak of Q2 2022, per the research of one of private real estate’s biggest managers. The decline is offering attractive entry points for investors looking to diversify their portfolios, according to Hines’ latest research paper. Still, the corrections vary significantly across the major markets in the region due to the different economic policies and conditions in each market. For example, the more substantial moves in rates in Australia and New Zealand have impacted liquidity and market pricing more there than the North Asia markets. In terms of sectors, the downward pressure on rents in offices is creating more opportunities to acquire and upgrade underperforming office assets in Asia’s leading cities. PERE‘s full coverage is here.

Tishman dives into data centers

Tishman Speyer’s first industrial acquisition in Europe will also be the first data center project for the New York-based manager, CEO Rob Speyer told PERE via email. Tishman has inked an agreement to buy Samson AG’s 750,000 square foot campus in Frankfurt, where it will develop a data center and logistics hub. Samson, a multinational industrial-valve manufacturer, is in the process of relocating from the campus that has served as its headquarters. “Data centers is one area we have been paying close attention to for a long time,” Speyer said. “We’ve recently seen an acceleration in demand that is expected to continue long into the future. Frankfurt in particular has become one of the world’s busiest internet exchange points.” Tishman made the acquisition for its European TSEV IX value-add fund. For future investments, “we would look to employ a combination of our existing vehicles as well as new capital,” Speyer said. Tishman also signed an agreement with Mainova WebHouse GmbH, a data center developer and operator active in the Frankfurt market, that gives Mainova an option to become a JV partner on the project.

Trending topics

Hopes fade, opinions divide

The first half of 2024 has brought a slow realization for the real estate sector that rate cuts that the US Federal Reserve signaled late last year are far from guaranteed. The Fed once again dashed hopes last month when it opted to keep the benchmark rate steady at the same level it has been since last summer. “At the end of ’23, everyone felt a sense of hope for numerous interest rate cuts in ’24. But as we got into the first couple of months of ’24, people started to realize that their hope was probably misplaced,” said Todd Liker, co-portfolio manager of the real estate opportunities strategy at Los Angeles-based manager Oaktree Capital Management. Some real estate managers are still predicting some form of cut this year. Others are pursuing strategies regardless of the cost of borrowing. But the longer this goes on, there more pain it will cause in the market, said Richard Mack, chief executive and co-founder of New York-based manager Mack Real Estate Group. “People are paying to hold assets, but unless rents rise quickly, eventually asset prices will have to adjust to rates, instead of hoping and anticipating rate decreases,” he said. More on that here.

Value-add fundraising looking rosier

For private real estate fundraising, 2023 was a bleak year, with just $42.4 billion raised for value-add funds – representing a 41 percent drop from a high of $71.7 billion in 2021 – and just $8.3 billion was raised through the first quarter of 2024, according to PERE data. While the industry saw a dramatic slowdown in capital formation and transaction volume, many are hopeful 2024 will see material increases in commitments for value-add investing, according to Greystar’s Wes Fuller, who notes, “Investors are very focused on taking advantage of stress or distress. A common theme is absolute return and how they are going to create that.”

Sustainable, energy efficient improvements are driving up value by increasing building performance while lowering costs and meeting ever-changing occupier demands. Meanwhile, investors and managers are leveraging new technology and asset-level strategies with big data and local market insights to drive increased valuations and returns. More on this analysis is in PERE‘s 2024 Value Creation report, available here.

Data snapshot

A moderated fall

While write-downs have moderated significantly from 3.4 percent in Q4 2023 to 0.5 percent in Q1 2024, property values in European commercial real estate have dropped 16.5 percent since Q3 2022, according to a report by private markets data provider Altus Group. The result is based on a set of core pan-European open-ended diversified funds with a total market value of €29 billion.


Evonite riders 

Three former executives of Europe-focused manager Rockspring Property Investment Managers, which was acquired by German manager Patrizia in 2017, have reunited to launch their own pan-European private real estate firm. Paul Hampton, Charles-Nicolas Tarrière and Kevin Muscat are the founding partners of Evonite, which will pursue value-add real estate investments across the region from a London base. Hampton and Tarrière left Patrizia – and the long-running TransEuropean fund series for which they were designated key people– in October last year. Muscat left Patrizia in 2020 to become head of transactions at logistics platform Mileway. Hampton told PERE the team “had been growing a bit disillusioned with the industry” in Europe over the past 5-7 years. “The focus of managers has been more toward growing assets under management, scaling business rather than necessarily improving performance,” he said. The aim with Evonite is to “reset the narrative and get back to performance.”

Investor watch

A lodestar for the North Star State

ESG remains a divisive issue among US pension plans. But the Minnesota State Board of Investments is decidedly on the ‘pro’ side of the debate. In an investment advisory meeting, the investor includes the following among its statement of beliefs: “Utilizing engagement initiatives to address environmental, social and governance-related issues can lead to positive portfolio and governance outcomes.” This ESG focus was applied to all four investment commitments that SBI staff recommended. In the recommendation for a commitment of up to $125 million to TPG Angelo Gordon’s AG Europe Realty Fund IV, staff cited the fund’s ESG commitment in the form of its registration as an Article 8 fund under the European Union’s Sustainable Finance Disclosure Regulation. SBI also noted the fund’s related environmental and social objectives falling into the categories of ESG-enhanced due diligence, decarbonization and partner engagement.

This week’s investor meetings

Tuesday, May 21

Davie Police Officers’ Pension Plan
Laborers’ & Retirement Board Employees’ Annuity & Benefit Fund of Chicag
Anne Arundel County Retirement & Pension System
Asahi Mutual Life Insurance Company
Assicurazioni Generali
Baltimore City Fire and Police Employees’ Retirement System
Chicago Teachers’ Pension Fund
City of Tallahassee Pension Fund
Houston Firefighters’ Relief and Retirement Fund
Jacksonville Police and Fire Pension Fund
Japan Post Bank
Maryland State Retirement and Pension System
New Mexico State Investment Council
Sumitomo Life Insurance
Wisconsin Board of Commissioners of Public Lands

Wednesday, May 22

City of Sarasota Firefighters’ Pension Fund
Contra Costa County Employees’ Retirement Association
Employees Retirement System of Texas
Los Angeles Water & Power Employees Retirement Plan
Louisiana State Police Retirement System (LSPRS)
Public Employees’ Retirement System
Montana Board of Investments
Powys County Council Pension Fund
Santa Barbara County Employees’ Retirement System
Tulare County Employees Retirement Association
Wandsworth Borough Council Pension Fund
Wyoming Retirement System
Oklahoma Teachers’ Retirement System

Thursday, May 23

Cook County Employees’ & Officers’ Annuity & Benefit Funds
Chicago Policemen’s Annuity & Benefits Fund
Chicago Transit Authority Retirement Benefits
City of Aurora General Employees Retirement Plan
City of Gainesville General Employees’ Pension Plan
City of Jacksonville Retirement System
City of Philadelphia Board of Pensions & Retirement
City of Tucson Supplemental Retirement System
East Bay Municipal Utility District Employees Retirement System
Fubon Life Insurance
Merced County Employees Retirement Association
Metropolitan Government of Nashville and Davidson County Employees’ Benefit Trust Fund
Minnesota State Board of Investment
Montana Board of Investments
New York City Fire Department Pension Fund
Pennsylvania Public School Employees’ Retirement System
Sonoma County Employees’ Retirement Association
Southeastern Pennsylvania Transportation Authority
Texas Municipal Retirement System
Wyoming Retirement System

Friday, May 24

Austin Fire Fighters Relief and Retirement Fund
Cathay Life Insurance
Jacksonville Police and Fire Pension Fund
NN Group
Peugeot Invest
City of Southfield Employee Retirement System
Tokio Marine & Nichido Fire Insurance
Wayne County Employees’ Retirement System

Today’s letter was prepared by Miriam Hall with Evelyn Lee, Charlotte D’Souza, Christie Ou, Guelda Voien and Samantha Rowan contributing.