Blueprint: Pike’s debut fund launch, Goldman’s ongoing real estate sell-downs, Actis’s Asia real estate expansion

Former Blackstone real estate boss Chad Pike launches a debut special situations fund for his new firm Makarora; Goldman readies another year of commercial real estate sell-downs after reducing its property holdings by more than $6 billion last year; Actis gears up for an Asia real estate expansion following the firm’s acquisition by General Atlantic; and more in today's briefing, exclusively for our valued subscribers.

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They said it

“What we see ahead is an unparalleled opportunity to deploy more than $65 billion of dry powder into a dislocated environment”

Nadeem Meghji, global co-head of real estate at Blackstone, speaking to PERE in an interview published this week.

What’s new

Pike: his new firm’s debut fund will comprise three different strategies

Pike’s three-pronged attack

When PERE broke the news of ex-Blackstone real estate boss Chad Pike’s return to the sector with the launch of a new firm in December, we reported a maiden vehicle would closely follow. But while the news of the first fund of his new firm Makarora was predicted, less predictable was how the vehicle would look.

According to an investment presentation obtained by PERE, Makarora Real Estate Special Situations Fund’s capital will be deployed via three strategies: one focused on higher-yielding, performing debt; one focused on preferred equity investments and one focused on opportunistic equity-side outlays. What does this array of approaches return? Mid-teens net IRRs, according to the presentation.

Flexible is how one capital advisory executive characterized the fund. “There is a small number of individuals who can demand a higher degree of freedom based on their prior achievements and he might well be one of them,” he told PERE. Makarora declined to comment on its fundraising plans.

Goldman down in real estate, up in performance

Commercial real estate’s drag on Goldman Sachs’ performance is on the wane after a couple of difficult quarters. In Q2 2023, equity investments in the firm’s asset and wealth management division showed net losses of $403 million from real estate investments, the majority of which came from markdowns in office-related investments. Equity investments also generated net losses of $212 million in the following quarter, driven by markdowns on investments in commercial real estate.

In Q4 2023, however, the bank reported net revenues of $838 million in equity investments, although they were partially offset by significantly lower net gains from real estate investments, according to its earnings results released last week. In the firm’s Q4 2023 earnings call, chief financial officer Denis Coleman expected Goldman’s sell downs of its overall balance sheet commercial real estate holdings – which reduced by more than $6 billion last year – to continue in 2024.

For more on the bank’s shrinking balance sheet property portfolio, check out our coverage here.

An eye on (developed) Asia

Actis has an eye on growing its real estate business in Asia following the firm’s acquisition by General Atlantic announced last week. While the firm has traditionally invested in emerging markets in Asia for real estate, it is planning to add Japan as a new market in its upcoming new economy-focused Asia real estate strategy.

Actis’s real estate entry into Japan is expected to build upon its existing energy business in the country, where the firm launched Nozomi Energy, a $500 million Japan-focused renewables platform, last year. Currently, the UK firm has raised a total of $1.45 billion across two real estate funds: Actis Asia Real Estate 1 and 2 since 2018. Brian Chinappi, partner and head of real estate at Actis, told PERE that General Atlantic has “recognized the value and potential” of the firm’s real estate business and it is “particularly excited” about the opportunity to grow the platform in Asia.

Trending topics

Geopolitical repercussions

The potential fallout from geopolitical tensions was the top near-term downside risk for real estate investment with the escalation of the war between Israel and Hamas, according to an Oxford Economics report published in the last week called Concerns over an expanded Middle East conflict emerge.

The report estimated the potential impact on all-property returns based on the increased China-Taiwan tensions and Middle East escalation, respectively. It predicted that the former would lead to a 6.3 percentage point drop below its baseline by year-end 2025 while the latter would push the return down by 3.7 percentage points below baseline next year. Overall, however, the economic forecasting firm expected higher-for-longer interest rates to be the greatest risk to real estate performance, dragging all-property total returns down by nearly 10 percentage points below the baseline in 2025.

An unexpected tailwind for demand

One manager yet to take a hit from geopolitics is Prologis. The industrial real estate giant expects demand for warehouse space will increase as shipping disruptions at the Suez and Panama canals continue, PERE reported in its coverage of Prologis’s latest financial results.

To meet a high volume of near-term deliveries, the demand for inventory in the next few quarters is expected to grow, chief financial officer Tim Arndt said during the firm’s Q4 2023 earnings call last week. Currently, the company is in discussions on 45 percent of its available space. The firm is also monitoring the situation on the East Coast more closely now but noted it was too early to predict the medium-term leasing decisions.

President Dan Letter said uncertainties in global shipping traffic will “remind people that they generally need to have a more conservative inventory strategy” in the long term and such conservatism would be “a tailwind for demand” for the logistics business.

Checkout time for GIC

GIC is reportedly weighing a sale of the Hilton Fukuoka Sea Hawke hotel, in western Japan. The hotel has more than 1,000 rooms and is earmarked to fetch between $583 million to $617 million, according to a Bloomberg report. The Singaporean sovereign wealth fund has been showing the asset to would-be buyers since the latter part of last year.

GIC, with some $69 billion of equity deployed in private real estate, was number one in PERE’s Global Investor 100 ranking last year. The investor is not expected to have a tough time selling. Travel has come roaring back since covid, and hotels are emerging as attractive assets after a difficult period during the pandemic. Buyers actively looking for hotel assets include Starwood Capital Group, which announced earlier this month it agreed to buy a 10-hotel portfolio in London, for a reported sum of $1 billion.

Data snapshot

Europe loses heart

Investors located in Europe are the most likely to decrease their allocations to real estate over the next two years, according to the Investment Intentions Survey 2024 conducted by industry association INREV.

People

TA Realty taps Shaheen for launch

TA Realty has named Tim Shaheen to run a dedicated hyperscale data center development arm within the firm’s digital real estate team. Although not formally announced until last week, the formation of the group coincided with TA Realty’s November signing of a build-to-suit lease deal with a global cloud services provider for a 430kW data center campus in Loudoun County, Virginia. The development, spanning 1.9 million square feet across five buildings, is due to be completed in 2027.

Shaheen was previously an executive at EdgeConneX and Aligned Data Centers and joined TA Realty in 2023. The firm’s digital real estate team specializes in identifying and developing strategic locations in US Tier 1 markets, where land and power are scarce.

Investor watch

Lights, camera, AXA!

AXA IM Alts has made its debut investment in the UK film and television studios market, snapping up the BBC Elstree Centre in northwest London from the country’s national broadcaster. Anglophile readers will be familiar with the studios’ biggest export: the hugely popular soap opera EastEnders, now in its 40th year of production at the 110-year-old facility.

The alternative investment arm of Paris-based insurer AXA announced last week it had exchanged contracts for the 16-acre complex, which will be leased back to the BBC for 25 years once the sale is completed early in 2025. The investor declined to disclose the price paid, but media reports from 2022 show the BBC was seeking around £70 million ($89 million; €82 million) for the asset amid a spending squeeze at the broadcaster. Last June, AXA IM Alts paid a reported €150 million for the Bry-sur-Marne film and TV studios in greater Paris.

This week’s investor meetings

Tuesday, January 23

Wednesday, January 24

Thursday, January 25

Friday, January 26

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