HighBrook exceeds fundraising target for Fund IV

HighBrook Investors has closed the fourth real estate fund of its flagship series, HighBrook Property Fund IV, raising $632 million, PERE can reveal.

The fundraising exceeded the West Palm Beach, Florida-based firm’s initial target of $550 million, though it fell short of the hard-cap of $650 million.

HighBrook raised $368 million as of May this year, closing on the remainder over the summer and early fall, amid recent capital markets volatility, Brian Carr, managing partner at HighBrook, told PERE.

Carr said the firm received repeat commitments from the majority of the investors from its last fund, HighBrook Property Fund III, which garnered $427 million.

Every institutional investor that committed above $15 million to that fund returned for the successor, with many upping their commitment, he added.

Investors that committed to Fund III included Louisiana School Employee’s Retirement System, Miami Dade College Foundation and Peter G Peterson Foundation.

LSERS committed $30 million, per PERE data. The pension returned with $50 million for Fund IV, according to public documents.

Highbrook previously raised co-investment vehicles alongside its fundraises. For Fund III, the firm raised more than $600 million in total across the commingled fund and two co-investments comprising $200 million of that money. For the successor fund, the firm expects to only raise one co-investment sidecar, meaning the co-investment amount is likely to be smaller with this raise.

The firm employed Monument Group as its exclusive placement agent.

The latest fund continues the firm’s value-add strategy, targeting special situations and distressed opportunities.

More than half the fund has already been deployed. HighBrook is primarily targeting industrial and residential properties, with approximately 80 percent of the capital deployed so far in the former of the two sectors. Select office investments might occur also.

Robert Giusti, HighBrook’s chief investment officer and head of Europe, said opportunities are arising, with competition pulling back due to less financing being available. There are also smaller owners being forced to sell assets or willing to give discounts to exit.

“It’s common for there to be a bid-ask spread at this point when you see a fairly rapid decline in asset valuations,” Giusti said. “We’re actively trying to find those sellers who may have some pressure to dispose of a property due to some kind of trigger event or other motivation.”

The firm forecasts most of the investments to be made in Europe, expecting approximately 85 percent of the fund’s capital to be deployed in the region, the remainder in the US, Giusti said. This, the firm’s executives said, was a reflection of where they believed opportunities would emerge first.

HighBrook was founded in 2010 and has now raised four funds. The target performance for the series is between 18 and 20 percent gross IRR. As at the end of 2021, Fund III had produced a 16.1 percent net IRR for LSERS, according to a performance report published by the pension. It said early investments in Fund IV had produced 18.1 percent net IRR.