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Carlyle’s Rubenstein: Core plus may exceed oppo market

The Washington, DC-based private equity firm is anticipating a first close on its new fund in the strategy early next year.

The Carlyle Group officially closed on its seventh opportunistic real estate fund just last month, but it is already ramping up its next property capital raise, this time in the core-plus space.

In an earnings call on Wednesday, Carlyle co-chief executive David Rubenstein said that the firm’s core-plus fund was now in market and that firm was expected to have a first closing on the new vehicle early next year.

“We are very optimistic that we can raise a target there that will be pretty attractive,” he said. “It’s structured somewhat differently than our typical private equity kind of funds. It’s more of an open-ended type of vehicle and it will trade on an NAV (net asset value) basis. But it’s similar to other core-plus type funds in the market. It’s one that can continue to grow all the time, it doesn’t really require a seriatim kind of fundraising.”

Rubenstein went on to add that the opportunities in core-plus real estate could exceed those in the opportunistic space, where Carlyle historically has been most active in the asset class. “It’s a very large market,” he said. “I suspect core-plus may be an even larger market than opportunistic in the end because there are more products you can buy with a core-plus type of return.”

PERE reported in August that Carlyle had begun raising capital for its new core-plus real estate fund and that it had tapped one of its senior real estate executives, Mark Schoenfeld, to head up the new platform, which is part of the overall US real estate business headed by Rob Stuckey.

Unlike its primary opportunistic business, which typically pursues net returns in the high teens, Carlyle’s core-plus platform will target returns between 9 percent and 11 percent – a range that is considered attractive for many investors, given the current low interest rate environment. “That has turned out to be a very interesting part of the business and I think other firms who are in the opportunistic business are also going into the core-plus business,” Rubenstein said during the firm’s second-quarter earnings call in July.

Carlyle reported economic net income (ENI) for its real assets business – which includes real estate, natural resources and legacy – of $26 million for the third quarter and a loss of $47 million for the last 12 months. Meanwhile, the firm posted an overall loss of $128 million for the quarter and $504 million for the last 12 months.

The firm had total assets under management (AUM) for real assets of $40.2 billion as of September 30, down 12 percent over the last 12 months. Across all of its businesses, Carlyle’s total AUM was $187.7 million during the third quarter, down from $202.6 million from the same year-ago period.