Harbert seeks 2023 close for latest European fund

Following a first close toward the end of last year, the US manager hopes to wrap its largest-ever Euro fundraise by year-end.

Harbert Management Corporation, the Alabama-based manager, is looking to hold a final close on its sixth Europe-focused value-add real estate fund by the end of this year, PERE has learned.

The manager held a first close on Harbert European Real Estate Fund VI in November 2022 with approximately $287 million from investors, an SEC filing showed. PERE understands that, with the first tranche of Harbert’s own €20 million commitment also having been provided, the size of the first close totaled €300 million. The fund has a target size of €1 billion, which would make it the largest vehicle yet in Harbert’s European value-add fund series.

According to a market source, through HEREF VI, Harbert will pursue a similar strategy to its predecessor funds and target ‘defensible locations’ which provide opportunities for exit liquidity amid strong rental growth and supply/demand dynamics.

The fund has western European markets including the UK, Ireland, France, Netherlands, Spain and Portugal in its sights. PERE understands that the Nordics, Germany and Poland – where Harbert has invested through previous funds in the series – are not target locations for the latest vehicle. According to a market source, the impact of Russia’s war on Ukraine is a key factor in Harbert’s pull-back from Poland, while the increase in the number of local players in the Nordics and Germany has adversely impacted the competitive landscape in those markets. Germany’s heavier reliance on Russian energy relative to other target markets was also a factor.

The fund will primarily be invested in residential, logistics and multi-let industrial opportunities across both existing assets and forward funding, including repositioning strategies. Harbert will also consider office and retail assets on an opportunistic basis.

Two-thirds of the capital raised for the first close came from North America-based investors, including $75 million committed by the Teachers’ Retirement System of Louisiana. The public pension fund previously committed $50 million to Harbert’s prior fund in its European series, Harbert European Real Estate Fund V. Fund V closed in April 2019 with €662 million in total capital, and has generated a net IRR of 19.1 percent as of March 2022, according to fund documentation seen by PERE. Other investors in the prior fund included Houston Firefighters’ Relief and Retirement Fund, Oklahoma Teachers’ Retirement System and Oslo Pensjonsforsikring, PERE data shows.

Harbert, founded in 1993, manages approximately $8.4 billion in assets globally. The firm first entered the European real estate market in 1998 and established the Harbert European Real Estate division in 2003. Harbert or its affiliates have so far completed more than €3.6 billion of acquisitions in Europe, and the firm has regional offices in the UK, France, Luxembourg and Spain.