Harbert goes for round two

The US alternative asset investor has raised $305 million for its second private equity real estate vehicle focused on the European property markets.

US alternative investment firm Harbert Management has raised $305 million (€226 million) for its second opportunity fund, Harbert European Real Estate II, the firm's largest European vehicle to date.

Scott O'Donnell, managing director of the European Real Estate Investment team, said that the fund would target all asset classes across Europe. “We will seek out investments that are below the radar screen of the larger funds, but too big for the more local, regional investors,” he said.

Harbert's first fund, which totaled approximately$54 million in equity, came primarily from internal Harbert capital. The vehicle, Harbert European Real Estate I, made approximately 13 investments with a total transaction value of around $300 million. Thus far, the fund has sold six assets, generating a 40 percent return and a multiple of two times equity on its realized investments.

Harbert formalized its drive into the European market in 2002 and, according to O'Donnell, wanted to test its strategy with a small fund before expanding its efforts. “We want to make sure we have put the right team in place, work together well, can invest money and can prove that the strategy works,” he said. “Once that is done, we go out and market the fund.”

With leverage of up to 75 percent, Fund II has the capacity to make $1.2 billion in acquisitions, which it typically makes through joint ventures or with country-specific partners. Thus far, the firm has invested $50 million of equity out of the fund in deals in Spain and Germany. But Harbert is also looking further east.

“We are seeing deal flow in Bucharest as well as Croatia and similar markets,” said O'Donnell, who added, however, that Russia is not yet on the list.

Harbert, which is based in Birmingham, Alabama and has approximately $7.5 billion in capital under management, has been expanding its real estate operations recently accross Europe. In February, it opened an office in Madrid and hired dealmaker Roque Rotaeche from Richard Ellis. More recently, the firm hired US Invest's Adam Karasch to cover Poland. The firm has also opened an office in Warsaw and Karasch's role will eventually expand to include neighboring markets in Central and Eastern Europe.

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