Keystone Property Group has closed its second private equity real estate fund on $111 million (€87 million). Through the new vehicle, which has already committed about a third of its capital, the Conshohocken, Pennsylvania-based firm has expanded beyond its traditional investment territory in the Philadelphia suburbs, southern New Jersey and Delaware.
“It’s kind of a natural extension of our business plan,” says Bill Glazer, the firm’s founder and president. “We’ve been successful in our first couple of markets and regionally, so we’re now going to look to get into some other major markets that have all the fundamentals that allow us to be successful.”
KPG’s funds have achieved an IRR of over 20 percent, says Glazer. Keystone’s latest offering is more than double the size of its predecessor, which closed on $35 million.
KPG, which targets office and industrial properties with upside potential, recently made its first investment in the Chicago suburbs, and has its eye on deals in major metro areas in South Florida, Washington DC and Baltimore, according to Glazer. Its first vehicle focused on acquisitions in Philadelphia’s suburbs in both New Jersey and Pennsylvania, but it also invested in central business districts in Delaware.
In Chicago, KPG bought a 100,000-square-foot, three-story office building on the Motorola campus in suburban Libertyville, for $102 per square foot. The building, constructed in 2002, was approximately 60 percent occupied when acquired. Three more acquisitions in Chicago’s suburbs, which would give the firm another 750,000 square feet in the market, are under contract and Glazer expects them to close by the end of the year.
“Typically our story is, we like buy capital starved assets, or functionally obsolete assets,” says Glazer. “We add the capital necessary to bring them to the top of the market and create an institutional grade asset.”
KPG plans to spend another third of Fund II’s capital by the end of the year and expects the vehicle to be fully deployed by the second quarter of 2007. The firm also plans to start raising its third vehicle in early 2007.