CBRE GI closes ‘cycle-aware’ US value-added fund on $1.3bn

The Los Angeles-based firm’s eighth vehicle in the fund series is nearly 60% deployed.

CBRE Global Investors has wrapped up fundraising for its latest US value-added vehicle, positioning the $1.34 billion fund as “cycle-aware,” with lower leverage and a focus on better quality assets, the firm said on Tuesday.

The Los Angeles-based firm launched CBRE Strategic Partners US Value 8 in August 2016, according to a filing with the Securities and Exchange Commission, with a $1.5 billion target. The firm closed the predecessor vehicle in July 2015 on $1.3 billion.

With an eye on income-generating properties, the firm is investing in first- and second-tier metropolitan areas and has a 60 percent leverage cap on the portfolio. At close, 59 percent of the fund’s capital was deployed in 17 assets.

“The one thing we emphasized to our investors consistently is our focus on being cycle-aware,” portfolio manager Robert Perry told PERE. “We’re not just immediately off the bottom of a market correction; we’re many years into a market cycle. We’re not retreating from the market but we’re trying to invest with a cycle-aware focus.”

In one recent investment out of Fund 8, the firm

Robert Perry

purchased 150 North Michigan Avenue, a 41-story Chicago office. The building is 80 percent leased, and CBRE GI plans to renovate the streetscape, lobby and gathering places for tenants.

“We think it’s got the bones of a very institutionally-appealing asset that simply needs some capital and physical upgrades,” Perry said. “It lines up very well with the investment thesis of the fund. We’re looking at assets of that quality in terms of location, quality and prominence that we can upgrade. These are also assets that have substantial leasing in place with opportunity to increase income over time.”

Fund 8’s 25-member investor base includes institutions from the US, Europe, the Middle East and Asia, with a “significant” portion of the capital coming from existing investors, Perry said. New investors came from Europe, Asia and the US.

Capital commitments included $200 million from the Teacher Retirement System of Texas, $50 million each from the Employees’ Retirement System of the State of Hawaii and the Kansas Public Employees Retirement System, and $35 million from the Illinois Municipal Retirement Fund, according to PERE data.

The fund series is targeting a low double-digit net internal rate of return. Fund 7, which is fully invested, generated a 12.4 percent net IRR as of the first quarter, according to pension fund documents from the San Diego City Employees’ Retirement System.

CBRE GI’s Strategic Partners US program has raised $9.1 billion in 11 funds and three co-investment vehicles in the last 11 years. In Europe, the firm is currently raising its second value-added fund, CBRE Europe Value Partners II, with a €1 billion target, PERE previously reported.

Overall, CBRE GI managed $98.3 billion as of September 30.