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Crow Holdings Capital raises $750m for first development fund

The Dallas-based manager raised half the capital from new investors, including $200m from private wealth investors, for a vehicle aimed at furthering its exposure to development investments.

Crow Holdings Capital has hit the $750 million hard-cap for its Development Opportunities Fund, PERE can reveal.

The Dallas-based manager attracted approximately half of the equity from investors new to the firm, including $200 million from private wealth channels, it is expected to state in an announcement within the next week.

The Crow Holdings Development Opportunities Fund was devised to enable the firm to continue investing in developments beyond the allocation limitations of its main Crow Holdings Realty Partners IX fund series. The series has a cap on development of about 40 percent of its capital.

Chief executive officer Bob McClain said when Partners IX had reached 30 percent, the decision was made to launch a specific development fund, adding that it also “gave us a chance to increase our exposure to a broader pool of investors.”

More broadly, Crow Holdings Capital is looking to capitalize on the continued demographic shifts in the US, namely increased e-commerce in retail and migration trends, Michael Levy, chief executive officer of parent Crow Holdings, told PERE. As such, the main sector focuses of the vehicle are logistics and multifamily, expected to account for between 60 percent to 65 percent and between 30 percent to 35 percent respectively.

Those two asset types are highly sought after, with around 32 percent of respondents to PERE’s Investor Sentiments 2022 survey declaring interest in allocating more capital to both this year.

The firm said 95 percent of the capital is already accounted for. The remaining 5 percent is being reserved for unexpected construction costs.

“We’ve tried to be responsive to investors with respect to the way we structure our investment ventures and vehicles to meet their needs,” Levy said. “The underlying investment strategies are consistent with what they’re looking for at this moment in time.”

McClain said the development fund could precipitate another series, as the firm could have raised more capital for the strategy for the first vehicle but determined the amount raised was commensurate with the development assets identified for acquisition. McClain indicated that a decision to proceed with a sequel vehicle depends on the marketplace.

“We don’t try to predict the future. We react to the marketplace we are investing in,” McClain said. “If, for whatever reason, we’re able to turn back to buying assets below replacement costs, we would shift heavily towards an acquisition model.”

The firm has had a busy fundraising time, mostly for the same sectors. This is the second fund close in less than a month after Crow Holdings Capital raised $600 million for the Crow Holdings Industrial Property Trust, for retail investors, earlier this month. In February, its development arm formed an ‘attainable’ housing development joint venture with two undisclosed institutional investors, garnering $400 million in capital. In September last year, the firm closed on more than $2.5 billion for its Crow Holdings Realty Partners IX fund and accompanying co-investment.

Crow Holdings Capital is understood to be in the market fundraising for the 10th fund in that series, according to regulatory filings. The firm declined to disclose the fund’s return targets but, typically, development strategies carry an opportunistic risk and profile of 20 percent IRR and 2x equity multiple.