The Chicago-based manager launched Fund IX in June 2022 and gathered $1.08 billion in an initial close a year later, according to PERE data. Limited partners in Fund IX include Oregon State Treasury, which committed $150 million in June 2022, and California State Teachers’ Retirement System, which agreed to invest $100 million in June 2023, PERE data showed. The firm also raised $450 million of co-investment capital in the first close.
Harrison Street declined to comment, but PERE understands the manager now has captured two-thirds of its $3 billion target for the fund, which has a hard-cap of $4 billion. A final close for Fund IX is anticipated during H1 2024, according to a source familiar with the matter.
Should Harrison Street reach its target for Fund IX, the vehicle would be the firm’s largest-ever. It previously raised a total of $2.5 billion for the fund’s predecessor, Fund VIII, comprising $2 billion in the main fund plus an additional $510 million in co-investment capital.
With Fund IX, Harrison Street will continue to pursue its US opportunistic strategy focusing on the acquisition, development and repositioning of assets in alternative sectors that include senior housing, student housing, healthcare delivery, life sciences, built-to-rent, data centers and self-storage.
The firm has made four investments through the fund to date. The deals include the acquisition of a student housing property in Tucson, Arizona in partnership with residential real estate developer Core Spaces, announced in May; and the purchase of a life science-anchored mixed-use development in Louisville, Colorado, announced in July 2022, in a joint venture with Chicago-based real estate investment and development firm Sterling Bay.
PERE understands that Harrison Street targets an internal rate of return of 15 percent or higher for its opportunistic strategy. Performance data was not yet available for Fund VIII, according to New Mexico Public Employees Retirement Association’s Q1 2023 real estate performance report. However, the fund’s predecessor, Fund VII, was generating a net IRR of 15.62 percent and a total value to paid-in of 1.39x, the report showed.
Fund IX is currently the fifth-largest closed-end North America real estate fund in market – a distinction it shares with Affinius Capital’s Digital Economy Partners and Ares Management’s Ares US Real Estate Opportunity Fund IV, both of which have $3 billion targets, according to PERE data.
The largest US fund in market, fellow Chicago-based manager Oak Street’s Oak Street Real Estate Capital Fund VI, has a target of $5 billion, followed by Boston-based Rockpoint’s Rockpoint Real Estate Fund VII, which has a $4 billion equity goal.
Also in the top 10 are Bain Capital’s Bain Capital Real Estate Fund III and Berkshire Residential Investments’ Berkshire Bridge Loan Investors-MF1 III, for which the managers are aiming to raise $3.75 billion and $3.5 billion, respectively. Meanwhile, both GLP Capital Partners and DRA Advisors are seeking to collect $2.75 billion for their latest funds.
Of those 10 funds, however, Fund V is one of only five that have closed on capital to date, according to PERE data. Oak Street has gathered $3.69 billion for Oak Street Real Estate Capital Fund VI, followed by Rockpoint with $2.53 billion, PERE data showed. GCP also has collected $930 million for GLP Capital Partners V while DRA has corralled $1.2 billion for DRA Growth and Income Fund XI.
Launched in 2005, Harrison Street is one of the world’s largest real estate fundraisers by capital raised over the past five years. The firm currently ranks 31 in the 2023 PERE 100 ranking, having collected $6.95 billion in private real estate direct investment capital during the period.