San Francisco-based real estate investment manager DivcoWest has wrapped up its latest value-added vehicle more than $200 million above its original target, according to a source familiar with the matter. DivcoWest Fund IV brought in $976 million in equity commitments, hitting its increased hard cap after just nine months on the fundraising trail.
Fund IV, which had a target of $750 million and an initial hard cap of $888 million, held a first close in August on $125 million. At that time, Divco decided to raise its hard cap to $976 million due to strong demand.
The vehicle garnered commitments from 21 investors, half of which were new to Divco and half of which had invested in the manager’s previous funds. The firm used placement agent Greenhill & Co. to help solicit commitments from a diverse sampling of the investment community, with 55 percent of the capital coming from public sector pension plans, 20 percent from corporate pension plans, 15 percent from endowments and foundations and the remaining 10 percent from insurance companies, Taft-Hartley plans and high-net-worth individuals. Divco also made a $15 million GP commitment.
Fund IV’s US institutional investors included such pensions as the New York City Employees Retirement System, which committed $148 million, and the California State Teachers’ Retirement System, which committed $100 million. The Massachusetts Pension Reserves Investment Management Board, the San Francisco Employees Retirement System and the New Mexico State Investment Council also invested capital.
“The key to the support Divco has seen is its vertically integrated operator style,” said Bill Thompson, chairman and managing director of Greenhill’s real estate capital advisory group. “Investors see that they have longstanding relationships with their tenants in the tech community, and that’s really where the rubber meets the road in the real estate business.”
Through the fund, Divco will invest in high-growth markets that provide opportunities to acquire and develop office and research & development properties for companies in the technology industry. These markets include the San Francisco Bay Area, Southern California, Seattle, Portland, Oregon and Austin, as well as the Boston, New York and Washington DC metropolitan areas. The fund is targeting gross returns of 14 percent to 18 percent and net returns of 11 percent to 15 percent.
The close of Fund IV sees Divco continue its history of quick and sizeable fundraises. In January 2012, the firm closed Fund III and its co-investment vehicle, raising a total of $871 million in just over six months.