GTIS closes record-breaking fund

The New York-based fund manager has closed on the largest US diversified residential fund to date, far outstripping its initial fund target.

New York-based GTIS Partners has held a final close on $716 million in equity for its GTIS US Residential Strategies Fund, making it the largest domestic diversified residential fund in history. The fundraising surpassed GTIS’ initial target by a substantial margin, as the firm originally targeted between $400 million and $500 million for the vehicle.

As GTIS’ debut US residential real estate offering, the vehicle differs from other residential funds due to its diversified strategy. GTIS plans to use the capital for acquisitions and distress, as well as to finance homebuilding construction and land development. Although the fund originally targeted suburban markets, the focus has shifted to include more urban areas as well.

GTIS president and chief investment officer Tom Shapiro told PERE that the fund’s increase in size came in part from the improvement of the residential market over time. “When we started to raise the fund, the market was characterized by a very distressed environment but, as the fund was raised, there was a lot more transparency in the markets and the opportunities started to change,” he said. “We found a lot more opportunity, so we raised a larger fund than we had anticipated.”

The US Residential Strategies Fund received commitments from a combination of investors, including foundations, endowments, pension plans and insurance companies. GTIS held a first close of $41 million in March 2012 and had raised a total of $256 million as of May 2013. In July, the Texas Permanent School Fund committed $50 million to the vehicle.

So far, US Residential Strategies Fund is approximately 60 percent invested in New York, California, South Florida, Texas, Nevada, Georgia and Arizona—markets that GTIS believes will outperform in both job and GDP growth over the next several years, according to Shapiro. Recently, the firm has focused on urban markets such as New York City and Miami, completing three transactions requiring $200 million in equity.

GTIS plans to put the remaining 40 percent of the fund’s capital to work within the next year and has a “very strong pipeline” of potential investments. Shapiro explained that the fund’s success thus far has come from its unique diversified strategy, and he believes that success will continue. “We’ve never limited ourselves to one portion of the sector, like single-family homes,” he said. “The concept for the fund has always been to find the best risk adjusted returns in the residential space.”