Last month, Allstate Investments, the asset management arm of the insurance company, committed $60 million (€46 million) to Beacon Capital's fifth opportunity fund, which is targeting $3 billion. It was Allstate's first private equity real estate commitment of 2007, but listening to Edgar Alvarado, it certainly won't be its last.
Alvarado, who has worked at Allstate Investments since 1993, became head of real estate equity funds last year. And he is intent on growing the company's already significant presence in the asset class. “We put our $400 million last year,” he says. “This year, I'm targeting $600 million, next year $800 million, then $1 billion. We'll hit $1 billion in steps, then see how things are going and ratchet it up or dial it down.”
To reach that goal, Allstate is banking on its long history in the private equity real estate sector, which stretches back to 1991. Last year, the company made nine fund commitments, eight of which were follow-on investments and Alvarado expects more of the same this year. (For example, Allstate has invested in two of Beacon's previous funds.)
Today, Allstate has $1.5 billion in its private equity real estate portfolio spread over more than 60 funds and approximately 27 fund managers. Though the portfolio is primarily domestic in nature, Allstate is also moving into international markets, primarily with existing relationships such as Beacon, Morgan Stanley and Westbrook.
According to Alvarado, one of the unique aspects of Allstate's investment program is its lack of an outside consultant. Though that means Alvarado spends a lot of his time on the road conducting due diligence, he believes that developing such expertise in-house is critical to achieving success in the asset class.
“I've been in the business almost 20 years,” he says. “I don't want to slam anybody, but the quality of our work is probably better, so I think we get a better result. And I think our performance underscores that.”
According to figures from Allstate, between 1991 and 2006, the private equity real estate portfolio has generated an annualized net return of 19 percent. Given that track record, it is small wonder that Allstate wants to grow the portfolio.
Partners Group acquires PCA
Swiss alternatives manager Partners Group is acquiring the real estate asset management arm of US-based Pension Consulting Alliance. Details of the transaction were not released, but the Swiss manger said information would be forthcoming in March, along with its 2006 financial results. Co-founded in 1988 by Nori Gerardo Lietz, PCA works with some of the biggest names in the US institutional investor space including CalSTRS, CalPERS and the Oregon Public Employees' Retirement Fund. According to a press release, the acquisition will add ten property pros to Partners Group's existing alternative investments team with Lietz continuing to serve as the chief strategist for private real estate investment management.
Fortress goes public
Fortress Investment Group debuted on the New York Stock Exchange at nearly $35 per share, roughly doubling its market capitalization. New York-based Fortress sold a 10 percent stake in its management company. At press time the stake was worth more than $1 billion (€770 million), which values the entire firm at $12 billion. Fortress has roughly $30 billion in assets under management, including private equity assets of $17.5 billion, according to the firm. It also manages hedge fund, real estate and other alternative assets. The firm was founded in 1998 by Robert Kauffman, Peter Briger, Wesley Edens, Randal Nardone and Michael Novogratz.
RREEF forms multi-family joint venture
RREEF, the property and infrastructure arm of Deutsche Bank, has formed a joint venture with Bainbridge Capital to acquire multi-family properties on the East Coast. Equity financing for the joint venture is coming from RREEF Real Estate Opportunity Fund II, which closed on $1.6 million (€1.2 million) last year. Simultaneously with the announcement of the new partnership, RREEF and Bainbridge announced the acquisition of a portfolio of apartment buildings in several Mid-Atlantic metropolitan areas.
New Jersey to invest $1.8bn in real estate
As part of its push into the private equity real estate sector, the New Jersey State Investment Council plans to commit approximately $1.8 billion (€1.4 billion) to real estate in 2007, according to its January board meeting. At the meeting, the institutional investor, which manages more than $83 billion, approved a $100 million investment in Blackstone Real Estate Partners VI, which has a target of $8 billion.
Angelo Gordon closes $160m net-lease fund
New York private equity firm Angelo Gordon closed on $160 million (€123 million) in equity for its AG Net Lease Realty Fund, which will look to acquire net-leased corporate real estate properties throughout the US. Including leverage, the fund will look to provide around $500 million worth of net-lease financing to non-investment grade companies and financial sponsors.