Hammes Partners, a Milwaukee, Wisconsin-based healthcare real estate manager, has raised $739 million in total commitments for its latest institutional value-added healthcare fund, Hammes Partners IV, PERE has learned. The vehicle, which closed at its hard-cap, had an original target of $675 million.
The vehicle is the largest-ever dedicated healthcare properties fund focused on the US, per PERE data. Only Luxembourg-based Threestones Capital’s European-focused Eurocare Real Estate Fund raised more capital in a fund format, closing on €900 million ($989 million) in 2020.
Hammes was in the market for seven months with its fund, in its quickest capital raise ever. The speed of the fundraise was due to most of the capital coming from existing investors, Patrick Hammes, managing principal, told PERE. He said that many investors had made soft commitments before the fund hit the market. Limited partners – all of which came from the US – include public pensions, foundations, endowments, insurance companies, family offices and some retail capital. Significant investors in the predecessor fund include the Employees’ Retirement System of Texas, New Jersey Division of Investment and Ohio Bureau of Workers’ Compensation, per PERE data.
This was Hammes’ third institutional fundraise and its largest. It first raised a total of $430 million between September 2013 and July 2015 for Hammes Partners II. The firm’s second institutional fund, Hammes Partners III, gathered $675 million in outside capital between January 2017 and early 2018. The first fund in the series was raised primarily from retail capital and was seeded with many of its early investments made from 2000 to 2012.
The firm is targeting mid-teen returns, in line with its value-added risk profile. The firm has exceeded those expectations in most of its previous investments, Hammes said, but declined to provide specific performance numbers. By the end of Q2 2021, Fund II had provided Ohio BWC with 23.88 percent net IRR, according to documents presented at the investor’s November 18 meeting. Fund III, meanwhile, had generated 15.96 percent net IRR.
Hammes is continuing its strategy of targeting outpatient healthcare facilities across the US. With assets in both urban and suburban locations, equity deployments can be as little as $3 million. The firm doesn’t set limits on how much it can deploy at the high end, but in cases where equity commitments are too large for the fund, it will engage in co-investments with investors. The overall investment capacity for the vehicle is around $2.5 billion, Hammes said.