CBRE Global Investors (GI) has wrapped up its latest value-add real estate fund, CBRE Strategic Partners US Value 7, after approximately 18 months in market. The vehicle collected $1.34 billion in commitments, slightly below its original $1.5 billion target.
Value 7 is the largest value-add fund that CBRE GI has raised to date. The firm launched the offering during the fourth quarter of 2013 and raised $943.5 million during the initial close in April 2014, according to filings with the US Securities and Exchange Commission. Twenty-six limited partners from the Americas, Europe, the Middle East and Asia committed to the fund.
US public pension plans made up the majority of the investors in the initial closing and the fund overall, while subsequent closings primarily involved non-US investors. US limited partners included the Texas Teacher Retirement System, Illinois Municipal Retirement Fund, San Diego City Employees’ Retirement System (SDCERS), Cook County Pension Fund and the Employees’ Retirement System of the State of Hawaii, according to documents from those pensions.
With Value 7, the real estate investment manager will pursue a similar strategy to the fund’s predecessor and purchase, reposition, lease and sell primarily office, multifamily and hotel properties in select US markets. However, with Value 7, CBRE GI will be focused on investments in Boston, the San Francisco Bay Area, Seattle and Dallas. By contrast, the firm did not invest in Boston or Seattle and was active in Houston and Denver with Value 6.
“The markets did shift,” said Vance Maddocks, president of Strategic Partners US, which has raised $7.2 billion in 10 funds over the past 15 years. “What we’re trying to do is focus on markets where we’re seeing the greatest employment growth, which will lead to strong market fundamentals.”
To date, CBRE GI has invested 75 percent of the fund in $2.5 billion of real estate. Fund investments include the Metropolitan Park, a 708,283-square-foot, two-building Class A office complex in Seattle; Gramercy on the Park, a Class A, 535-unit midrise apartment community in Dallas; and 235 Pine, a 150,159-square-foot class A office building in San Francisco. The firm is targeting a 15 percent gross and 12.8 percent net internal rate of return for the vehicle, according to documents from SDCERS.
“The opportunity set has definitely narrowed,” Maddocks added. About half of the deal flow that the firm is evaluating on behalf of Value 7 are assets that can be acquired through debt maturities, he said. “That would be one thing that stands out about this fund, the maturity or assumption of CMBS financing as creating opportunity to see assets trade.”