HighBrook Investors has closed on HighBrook Property Fund III, its largest-ever real estate fund, PERE understands.
The New York-based real estate investment firm raised a total of more than $600 million for its third real estate fund and two co-investment vehicles after 12 months, according to a source familiar with the matter. HighBrook held a first close for Fund III on October 5, 2017 and the final close exactly a year later. Inclusive of the two co-investment vehicles, the fundraise surpassed its $450 million target. The fund itself remained below the $550 million hard-cap.
In comparison, HighBrook’s first fund, HighBrook Income Property Fund, collected $231.6 million – exceeding its $200 million target – at its October 2012 final close, which occurred a year after its initial close, according to PERE data. HighBrook Income Property Fund II launched in March 2014 and closed in March 2015 on $308.2 million, surpassing the $300 million target.
Fund III attracted predominantly foundations, endowments, wealth managers and insurance companies from the US, with some European investors also committing capital. One investor was Louisiana School Employees’ Retirement System, which committed $30 million, according to PERE data. The majority of the vehicle’s limited partners had previously invested in HighBrook’s first or second fund.
In January, the firm acquired Mainland Offices, also known as Vasteland 10-40, for an estimated $16.4 million, according to data provider Real Capital Analytics. The purchase of the Dutch office asset was the first transaction made through Fund III, which is now almost 50 percent invested, PERE understands. The mandate for Fund III covers all property types in the US and Western Europe, particularly the Netherlands. Indeed, approximately half of the fund’s assets to date are located in the country. In comparison, Fund I invested only in the US, and around 25 percent of Fund II was invested in Western European assets.
HighBrook’s third fund will follow the same value-add and opportunistic strategy as its predecessor vehicles. Physical improvements to assets may include lobby renovations or the addition of amenities, while operational improvements will focus on increasing tenant occupancy.
The firm will also continue to source deals that involve complicated structures, such as the recapitalization and acquisition in April of the troubled Mesdag Delta Portfolio, PERE previously reported. HighBrook, through its third fund, bought the 56-asset Dutch portfolio from Amsterdam-based private real estate firm Breevast for €615 million and paid off the creditors, which canceled the planned foreclosure auction. The portfolio acquisition is the firm’s largest Fund III investment to date. HighBrook later sold the industrial assets for €136 million to Urban Industrial, the logistics platform of Amsterdam-based asset manager Aevitas Property Partners.
Founded in 2010, HighBrook has now raised a total of three funds, none of which have been fully realized. HighBrook Property Fund III targets a 18-20 percent gross IRR, according to an LSERS presentation. Previous investors have included the Berklee College of Music Retirement Plan and the Peter G. Peterson Foundation, among others, according to PERE data.