Clarion closes first student housing fund

The New York-based real estate investment manager has raised one of the largest funds dedicated to the niche sector, but fell short of its original $500 million target.

Clarion Partners, a New York-based real estate investment manager, and Campus Apartments, a Philadelphia-based student housing developer and operator, has held a final close on Campus-Clarion Student Housing Partners, which is focused on investing in student housing properties in the US. The vehicle attracted $402.9 million in commitments, below its initial $500 million target.

Clarion and Campus have been marketing the fund since at least March 2013, according to documents from the Teachers’ Retirement System of Louisiana (TRSL), which committed $35 million to the vehicle at its board meeting in January 2014. The firms held a first close on the fund in February 2014, collecting $114.6 million in commitments, and had raised $246.4 million as of earlier this month, according to filings with the US Securities and Exchange Commission. Other limited partners in the fund included the Employees Retirement System of Texas, which pledged $65 million last March and the Fort Worth Employees’ Retirement Fund, which committed $20 million last October. 

“We believe the fund benefits from a strong partnership between two platforms with a long and successful track record of investing in real estate,” added Rob Greer, managing director for Clarion Partners and portfolio manager for the fund. “The fund offers investors exclusive access to Campus Apartments’ pipeline of investments and operational expertise as well as Clarion’s long history as a leading real estate investment manager.” 

Campus-Clarion Student Housing Partners is the first real estate fund for Campus Apartment and Clarion’s first student housing-focused vehicle. It is also the latter firm’s first closed-ended offering since Clarion Development Ventures III, which was launched in August 2007 and closed one year later. The vehicle is the largest student housing fund to be raised by an operator, and has approximately $1.2 billion in buying power. 

With the fund, Clarion, which is led by chairman and chief executive Stephen Furnary, primarily will be responsible for portfolio-level management, portfolio-level research, portfolio reporting, asset management oversight and client service on behalf of the fund, according to the TRSL documents. Meanwhile, Campus primarily will be in charge of acquiring, sourcing and underwriting investments; property and portfolio debt placement; asset development and property management; and business plans, reporting and financial statements. Under the partnership, Clarion and Campus will work together on fund structure and governance; portfolio strategy; due diligence; exit strategy; and valuation and hold/sell analysis.

On behalf of the fund, the firms will seek investments in on- and off-campus student housing and university-related real estate throughout the US and require an average of $15 million in equity. The fund is anticipated to be 75 percent invested in 25 to 30 value-added and core-plus acquisitions, while the remaining 25 percent is projected to be allocated to eight to 10 development projects. The fund is targeting a net leveraged internal rate of return of 12 percent to 14 percent.