Blueprint: Stoneshield’s €750m Opportunity Fund III closing, a look inside today’s limited partner advisory committees, KKR’s focus on core real estate

PERE lifts the veil on the issues investors are discussing with their managers in this month's cover story, "Inside the LPAC"; KKR is becoming more active in the core and core-plus space thanks to a lack of competition; Southern Europe-focused manager Stoneshield Capital closes its third opportunity fund ahead of target – in just five months; all in today's briefing, exclusively for our valued subscribers.

They said it

“There’s bad news coming, but it’s the aftermath of the shipwreck that’s already happened” 

A bottom in commercial real estate valuations is now visible, Blackstone’s co-head of real estate Kathleen McCarthy tells the Milken Institute Global Conference this week, per coverage by Bloomberg.

What’s new

This month’s PERE cover story: LPAC investors share the most pressing issues they are discussing with their managers.

99 problems but an extension ain’t one

Plenty of issues can spark conflicts between limited partners and managers. But for one of the world’s largest real estate investors, fund term extensions are not among the most contentious. In PERE’s May 2024 cover story, Navid Chamdia, head of real estate investments at sovereign wealth fund Qatar Investment Authority, explained why. “We are long-term partners, and if they need more time because it is not the right or best time to exit, we are willing to accommodate and be understanding about it,” he said. This is despite the fact such extensions are likely to be “a large contributing factor” to the lack of liquidity in the market, according to commercial broker Savills’ latest Global capital markets week in review. For the issues considered more problematic for Chamdia and other members of limited partner advisory committees, check out our cover story here.

Contrarian on core

Private real estate fundraising has generally favored non-core over core strategies in recent times, with value-add and opportunistic accounting for approximately 60-70 percent of capital raised over the past five years, according to PERE’s Q1 2024 fundraising report. Core and core-plus real estate, meanwhile, represented 10-15 percent of capital raised during the same period. KKR, however, sees the relative lack of core and core-plus capital in the market as a reason to become more active in the space. “There is just almost no core and core-plus real estate capital out there, and we’re able to create really attractive unlevered returns,” chief financial officer Rob Lewin said during the firm’s Q1 2024 earnings call last week. The New York-based firm has core-plus real estate strategies in all three regions and can invest in core through its insurance business Global Atlantic and Japanese asset management company, KJRM. For more on KKR’s contrarian views on core and core-plus real estate, read our full coverage here.

One and done

PERE data shows the average time spent in market for Europe-focused private real estate funds closed last year was 23.4 months. But for one Luxembourg-based manager closing an opportunistic fund this year, five months was more than enough to get the job done. Stoneshield Capital, which invests in real estate across Southern Europe, has completed a final close for Stoneshield Opportunity Fund III with €750 million in commitments, exceeding its initial target of €700 million. The manager wasted no time between fundraises, getting back out on the road less than two months after the closure of the fund’s predecessor on $600 million in November. Co-founders Juan Pepa and Felipe Morenés, both former partners at US manager Lone Star Funds, told PERE around a quarter of Fund III’s equity has already been committed. In addition to distressed asset acquisitions, Morenés sees significant opportunity to acquire non-performing loans, owing to a lack of “truly local niche investors with discretionary capital” in Spain, Portugal and Italy. Read our coverage for more details.

Alterra was speedy, too

When it comes to fundraising, much of the commentary is about how it is taking longer, and the amount being raised is depleting. But not every company is having the same challenges. Similar to Stoneshield, which closed its third opportunity fund in five months, Philadelphia-based Alterra Property Group wrapped its fundraising for its latest industrial outdoor storage fund in just eight months. Alterra IOS Venture III closed early last week at $925 million, well beyond its original target of $750 million and hard-cap of $850 million. Its predecessor closed at $524 million. “We launched in January of 2023, which was a very difficult time to raise capital in the real estate world and alternatives in general,” Alterra chief investment officer Matthew Pfeiffer told PERE. “The interest that we’ve been hearing in what we were doing was pretty high relative to the larger market.”

Trending topics

Pay it floor-ward

Fundraising and dealflow are not the only parts of the private real estate market to have slowed and stagnated since the full effects of the rate-hiking cycle took hold. Findings from the annual compensation study conducted by PERE and Sousou Partners, published this week, show the average median growth in total remuneration across private equity real estate firms and real estate investment managers between 2022 and 2023 was less than 1 percent. This is the second consecutive year in which average median remuneration growth has fallen. “It’s not a surprise, as most of us were aware we’ve been heading in this direction for some time. But it was still brutal,” said Ghada Sousou, co-founder of the executive recruitment firm. Even so, she added that sentiment around pay is significantly more positive than the numbers would suggest. Mutual understanding of the asset class’s challenges is one factor in this. Another is that many real estate professionals can see what is just around the corner, as they tactically reposition themselves – and their carry clocks – to reap the potential rewards. Read our full analysis here.

One week, two Euro mergers

Manager La Française Real Estate Managers will form the real estate investment arm of Crédit Mutuel Asset Management, the new asset management business established by French banking group Crédit Mutuel Alliance Fédérale as it looks to bring its asset management companies under one organization. The arrangement, effective as of Wednesday, does not change the structure or leadership of La Française REM, which has about €32 billion in real estate assets under management. “Merging with Crédit Mutuel Investment Managers allows us to access a broader international investor base for both the retail and institutional arms of the real estate business,” said David Rendall, managing director of Paris-based La Française REM. He told PERE the majority of the manager’s institutional-grade real estate products are separate account mandates, but the plan is to balance this with more closed-end commingled funds in the coming years.

Meanwhile, London-based Cain International is merging with Blackbrook Capital, bringing the two firms’ combined assets under management to $17 billion. Blackbrook is now set to operate as a subsidiary of Cain, which is led by Jonathan Goldstein, and the firm’s portfolio – a total of 41 assets in eight countries across Europe – will be managed by Cain’s investment adviser. Cain chief executive Jonathan Goldstein described the merger in a statement as “an exciting milestone” in the firm’s business. “We are confident that Blackbrook’s deep expertise will significantly bolster the firm’s strengths as we continue to expand our reach across the European alternatives sectors,” he said.

Data snapshot

Off with a whimper

Fundraising was off to a sluggish start in 2024, with a total of $19.8 billion raised in in the first quarter of 2024, representing a 36.5 percent drop from the $31.2 billion raised during the same period in 2023, according to PERE’s Q1 fundraising report.


Martin takes a funds focus at CDPQ

Isabelle Martin is starting a new role, overseeing real estate funds in the investment funds and external management group at Canadian state investor Caisse de dépôt et placement du Québec (CDPQ), she announced in a LinkedIn post on Tuesday. Martin has been at Ivanhoé Cambridge for over 11 years, per LinkedIn, having most recently served as head of strategic partnerships for the last year. Between 2019 and 2022, however, she led the firm’s global funds business, making this latest role something of a return to familiar territory.

In January, CDPQ announced the integration of  Ivanhoé Cambridge, alongside Otéra Capital, its real estate credit business, in a move designed to drive efficiencies and bring significant annual cost savings.

Investor watch

ART targets UK and Europe

Australian Retirement Trust is on the hunt for more overseas real estate investment opportunities as it merges with other super funds. On Tuesday, its merger with AvSuper added A$2.43 billion ($1.6 billion; €1.5 billion) in funds under management. The deal comes as ART aims to have A$500 billion in funds under management by 2030, according to a statement. Last month, the firm opened an office in London to further explore infrastructure and real estate investments in the UK and Europe. ART’s chief investment officer, Ian Patrick, said in a different statement that the UK team will work with external investment managers to source new investment opportunities for its growing number of members. Currently, the investor has A$14.64 billion, or 5.48 percent of its portfolio allocated to real estate.

This week’s investor meetings

Wednesday May 8 

City of Fresno Retirement Systems
Connecticut Retirement Plans and Trust Funds
Firefighters’ Retirement System of Louisiana
Itochu Corporation
Los Angeles County Employees’ Retirement Association
Los Angeles Water & Power Employees Retirement Plan
San Francisco Employees’ Retirement System
University of Washington

Thursday May 9

City of Clearwater Employees’ Pension Fund
City of Fort Lauderdale General Employees’ Retirement System
City of Springfield Police and Fire Pension Fund
Dallas Police and Fire Pension System
Davie Police Officers’ Pension Plan
Maine Public Employees Retirement System
Montana Public Employees’ Retirement Administration
Municipal Fire & Police Retirement System of Iowa
New York City Employees’ Retirement System
Oklahoma City Employee Retirement System
San Diego City Employees’ Retirement System
State of Michigan Retirement Systems
Tacoma Employees’ Retirement System
University of Washington

Friday May 9

California Public Employees’ Retirement System
Mitsubishi Estate
North Dakota Retirement and Investment Office
Samsung Fire & Marine Insurance (SFMI)
San Diego City Employees’ Retirement System
Tokyo Star Bank
Wayne County Employees’ Retirement System

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