CBRE IM closes its first GP-led secondaries fund

The New York-headquartered manager’s latest vehicle also marks its first dedicated secondaries vehicle with an opportunistic risk-return profile.

CBRE Investment Management has closed its inaugural Global Special Situations Fund, targeting GP-led secondaries and recapitalizations, which also represents its first opportunistic real estate vehicle in the space.

The New York-headquartered manager began raising the fund pre-pandemic, holding a first close in early 2020, Matt Tepper, head of indirect real estate strategies in the Americas and fund manager, told PERE exclusively. The firm has closed on $599 million in capital commitments, having originally targeted $500 million. The capital was raised from a mix of existing and new investors globally. The commitments span the main fund as well as a few co-investment vehicles.

Matt Tepper

Until 2019, CBRE IM had been investing in GP-led real estate secondaries and recapitalizations across its core, core-plus and value-add strategies. Since then, the firm has seen more higher-risk, higher-return real estate secondaries deals come through its operating partner network. The firm had previously invested in opportunistic secondaries deals through its other vehicles but saw a big enough pipeline of transactions to justify a dedicated fund.

“We didn’t have the right capital sources to attack that segment of the market given where our client objectives were at the time,” Tepper said. He declined to disclose return targets, but opportunistic funds typically target net IRRs of above 16 percent.

With its secondaries fund, CBRE IM will invest in its high-conviction themes that include logistics, residential and self-storage. Around 70 percent of the main fund has already been deployed, all of it in those three sectors. PERE understands that the fund’s investments to date have included deals in European last-mile industrial, US single-family and US self-storage.

CBRE IM will look to invest in assets with uncompleted business plans, such as portfolios that are partly assembled, Tepper said. “What we’re underwriting is the completion of the business plan rather than the full soup to nuts,” Tepper said. This entry point means that CBRE IM avoids some of the risks inherent at the beginning of a business plan execution and a shorter hold period, meaning it can return capital to investors more quickly, he added.

“Buying into something that’s already been partly put together, you have the ability to underwrite the real estate, as well as the business plan, in a much more specific manner than you could in a blind pool situation,” Tepper said. “[That’s] where we think that you can drive some outsize returns.”