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EXCLUSIVE: Mesirow exits RE multi-manager business

Courtland Partners will be charged with winding down the funds of the financial services firm’s indirect real estate arm.

Mesirow Financial has pulled out of the real estate multi-manager business. The Chicago-based financial services firm has shuttered its Institutional Real Estate (MFIRE) fund-of-funds platform, dismantling its team and closing on a transaction to transfer the management of the existing funds to Courtland Partners, the Cleveland-based real estate investment advisory firm, last week.

“As investor appetite for real estate funds of funds was changing, we began an evaluation of the business,” wrote a Mesirow spokeswoman in an email to PERE. “We made the decision not to pursue any new funds and worked with our team on an orderly transition.”

MFIRE launched its first fund, MFIRE International Partnership Fund I, in 2007, raising $226 million, followed by MFIRE Domestic Partnership I, which collected $71 million in 2008. A third fund, MFIRE Global Fund II, closed on $91.5 million in 2013.

“Although the funds have performed well, we made the strategic decision to exit the multi-manager real estate business to focus on direct real estate, which is a larger business for us,” the spokeswoman said.

The MFIRE funds, although performing above their benchmarks for their respective vintages, were significantly smaller than the vehicles raised in Mesirow’s direct real estate business. The firm gathered approximately $400 million for Mesirow Financial Real Estate Value Fund I, its first value-add multifamily fund, and more than $500 million for Value Fund II in June. Other factors that were said to have played into the decision included the confusion that the firm faced in the marketplace over its direct and indirect real estate businesses.

In February, Mesirow began reaching out to limited partners in the MFIRE funds about its intention to seek LP approval to shutter the business and transition management of the funds to Courtland, according to a memorandum that was sent to MFIRE investors in February. The transfer was subsequently approved by limited partners and closed on July 8, according to multiple people familiar with the matter.

In 2006, Courtland was approached by a long-time client to help create a real estate fund-of-funds platform to help them get exposure to opportunistic investments. The firm then conducted a search to select an intermediary that would be responsible for capital raising and fund administration on behalf of the fund-of-funds platform. Mesirow was then chosen as the intermediary and general partner of the funds, while Courtland was designated as the subadvisor, conducting manager sourcing, manager due diligence and manager monitoring on all of the underlying funds in each fund.

Because all three funds were fully committed, Courtland’s primary responsibility will be to oversee the management and eventual wind-down of the MFIRE portfolio. The transfer does not mark a shift into investment management for the consulting firm. Jay Morgan, a senior consultant at Courtland and Mesirow’s primary contact at the firm, will now act as the lead manager on the funds and devote the majority of his time to managing and overseeing the vehicles. Rob Negrelli, also a Courtland senior consultant, will assist Morgan with those efforts.

Meanwhile, Mesirow will retain certain administrative and investor relations functions for the MFIRE business until the end of the year. Jessica Morris, who was a senior vice president of the MFIRE team, will remain with the firm and be actively involved in the transition.

The MFIRE team, formerly led by senior managing director Joshua Daitch, has disbanded. The team’s senior members once included Daitch, Morris, senior managing director Michael Clarke, and senior vice presidents Todd Fowler and Jeffrey Sobczynski.

In 2013, Sobczynski left to co-found Accord Group with former Presidio Partners founders Jack Berquist and Desi Co, while Fowler assumed the role of director of marketing and client service at American Realty Advisors. Clarke departed to join CBRE Global Investors last year. Daitch, meanwhile, exited Mesirow in April to launch his own real estate merchant banking firm, SAJE Capital, LLC, which will focus on property transactions across the capital stack at both the asset and the entity level.