LaSalle Investment Management is planning to offer investors a Europe-focused value-add commingled fund with a capital-raising target of more than €1 billion, PERE can reveal.
The Chicago-based manager, which currently manages almost $77 billion of assets, is understood to be drawing up a private placement memorandum for a vehicle expected to be called LaSalle Value Partners Europe ahead of a marketing effort expected to commence before the summer.
The firm declined to comment, but it is understood the effort to bring the vehicle to market was one outcome of a European team build-up spearheaded by the return of Michael Zerda from Blackstone. He re-joined the firm a year ago as head of European debt, special situations and value-add equity strategies.
It also follows the ascension of Mark Gabbay to global chief executive officer last year. Gabbay, who grew the firm’s Asia business, is known for his acumen in higher risk and return strategies. It is understood part of the rationale for his appointment was to position the firm well amid the investment cycle reset following the start of the pandemic. Read PERE’s big interview with Gabbay following his appointment here.
A successful capital raise would see LaSalle provide its institutional investors with a value-add vehicle similar in strategy to its long-standing LaSalle US Income and Growth Fund series and its LaSalle Asia Opportunity fund series. According to PERE data, LaSalle US Income and Growth Fund VIII was closed on $832 million in 2018, while LaSalle Asia Opportunity Fund VI had attracted $1.07 billion in 2021 as of last September. That vehicle has a total capital target of $1.5 billion.
With a €1 billion-plus target, LaSalle Value Partners Europe fund is expected to be able to mirror the kinds of investments targeted for its US and Asia peers, although its genesis is different. The vehicle is the first discretionary, commingled value-add risk and return fund for the firm in Europe, but represents the continuation of such strategies previously funded via a series of value-add and special situations special accounts.
Among the investment types for the conjoined strategy vehicle will be distressed assets, preferred equity pieces, corporate real estate and some development or redevelopment. From its outlays, gross IRRs of 17 to 18 percent are expected. These should translate to net IRRs of 14 to 15 percent and a 1.5x equity multiple, PERE understands.
LaSalle’s European value-add fund comes at a time of increased focus for the strategy in the institutional real estate sector generally. According to PERE data, the proportion of the total capital raised for private closed-end funds which was raised for value-add funds has increased three years in a row, from 22 percent in 2019 to 30 percent in 2020 to 33 percent of the total $176 billion raised across strategies last year.
In Europe, the strategy has similarly seen significant engagement. PERE data reveals value-add fundraising has likewise risen for three consecutive years, culminating in $12.25 billion raised for the risk-return profile in 2021.
Notable recent closings including Barings’ Real Estate Value-Added Fund II, which hit its €850 million hard-cap at its final closing last month, while PGIM collected $1.1 billion for its European Value Partners II fund and related sidecar vehicles last September. LaSalle’s latest offering comes alongside new vehicles from other large managers including Hines, which launched its Hines European Value Fund 3 in early March.