Exeter holds $615m final close on second fund

More than half of the limited partners for the Pennsylvania-based private equity real estate firm’s second value-added industrial fund came in during the final round of capital-raising.

Exeter Property Group has attracted a total of $615 million in commitments for Exeter Industrial Value Fund II, the firm’s latest value-added industrial vehicle. The Plymouth Meeting, Pennsylvania-based real estate investment firm initially targeted $425 million for the fund, with a hard cap of $575 million, but ultimately it raised the hard cap to $615 million to accommodate a couple of last-minute large investors. Even with a higher hard cap, however, Fund II was oversubscribed, with the firm turning away $40 million in commitments from three investors that had asked to increase their allocations.

“There was a crush of interested investors at the end,” said Rayenne Chen, the firm’s director of investor relations, noting that the fund’s investor base encompassed US public pension plans, corporate pensions, union pensions, fund of funds and high-net-worth individuals. Exeter had been courting many of the investors for 18 months, so the firm asked its existing limited partners for consent to increase the hard cap.

Of the 27 LPs in the fund, 15 came in during the final close and about two-thirds were first-time investors, according to Chen. Investors included the New York State Teachers’ Retirement System, Pennsylvania Public School Employees’ Retirement System, Ford Motors’ corporate pension, Metropolitan Real Estate Equity Management, Morgan Stanley Alternative Investment Partners and German insurer Talanx.

“There’s much more interest in sector-focused, value-added real estate operators,” said Chen. Many new investors in the US industrial sector are coming from outside the country, particularly from Asian sovereign wealth funds and Canadian pension funds, she noted. Additionally, investors are viewing operator-based funds as a more cost-effective investment strategy than allocator-based models.

Fund II, which is targeting a net internal rate of return of 13 percent to 14 percent, is seeking value-added investments in industrial, flex and business park properties and first mortgages against such properties throughout major markets in the eastern, central and southern United States. Law firm Clifford Chance advised Exeter on the fund's formation.
Exeter held a first close on Fund II in May 2011, raising $135 million in commitments from existing investors. However, fundraising plateaued at $325 million in July and remained quiet during the third and fourth quarter of 2011. Demand started picking up again this year and, by April, the firm had asked its LPs for approval to raise the fund’s hard cap.

To date, Exeter has invested $200 million of the fund’s equity in 14 transactions, including the acquisition of a three-building, 600,000-square-foot industrial property in Louisville, Kentucky from Prologis in March.