Greystar eyes core-plus real estate fund – Exclusive

The Charleston, South Carolina-based multifamily investment firm is targeting a substantial first close by the second quarter, with backing from a couple of marquee investors.

As it nears the final close of its latest value-add vehicle, Greystar Real Estate Partners is now preparing to expand into core-plus real estate with the launch of an open-ended fund, according to two sources familiar with the matter.

Greystar declined to comment, but PERE understands that the firm is expecting to hold a first close of around $1 billion for the new fund by the second quarter. Likely cornerstone investors include longtime partner Ivanhoé Cambridge, the real estate subsidiary of Canadian pension fund, La Caisse de dépôt et placement du Québec and Singapore’s sovereign wealth fund, GIC.

The fund, which will be called Greystar Growth and Income Fund, is believed to be the first multifamily-specific, open-ended core-plus real estate vehicle of scale. More than 75 percent of the investments will be in the six US gateway markets of Boston, New York, Southern California, Northern California, Seattle and Washington, DC. The capital raised during the first close will be used to acquire assets for the seed portfolio in the fund.

With its core-plus strategy, Greystar will focus on lower-risk execution strategies and driving returns through active asset management. With the new fund, the firm will target 9 percent to 11 percent net returns and cap its investments at 50 percent leverage. By contrast, the firm’s value-add strategy targets mid-teens net returns and typically uses higher leverage of approximately 65 percent.

Additionally, the firm will seek newer-vintage assets – typically 10 years old or younger – and investments where rehabilitation or redevelopment makes up 5 percent or less of the project’s cost, for its core-plus fund.

Greystar, led by chairman and chief executive Bob Faith, will not be using a placement agent for the fund, sources said. Law firm Simpson Thacher is said to be the legal advisor for the fund.

Meanwhile, Greystar is anticipated to hold a final close for its latest value-added real estate fund, Greystar Equity Partners IX, at its $1.25 billion hard-cap by the end of the month, sources said. That fund will represent the firm’s largest-ever capital raise. Greystar launched Fund IX with a $1 billion target, PERE reported in November 2015.