LCN Capital Partners has raised more than $750 million for its latest pair of real estate funds, the New York-based firm said Monday.
The firm collected $393 million for LCN North America II and €309 million for LCN European Fund II, both of which were launched in the first quarter of 2016 with $300 million and €300 million targets, respectively. With capital from both vehicles, the firm is investing in corporate sale-leaseback and build-to-suit investments with leases of 15-25 years.
LCN is targeting 11-13 percent net internal rates of return for the fund series, co-founder Ed LaPuma told PERE. He added that LCN’s first pair of Europe and North America funds, which closed in September 2014 on a combined $370 million, has achieved those returns to date.
“Our investment partners look at the strategy and see an opportunity to get very predictable, inflation-protected income quarterly from distributions at a level much higher than they can get from cash-on-cash returns, at a risk level we think that’s substantially lower than cash-on-cash,” LaPuma said. “Likewise, our tenant clients think it’s a great opportunity for them because companies today are forced to continually look for ways to be more efficient… they can redeploy that capital into their core business.”
The fund series’ investor base comprises a mix of domestic and international pension funds, insurance companies, foundations, endowments and ultra-high-net-worth individuals, he said.
The fund series has a slightly longer investment period than other private equity real estate funds and has quarterly distributions, LaPuma said. The first two funds have a 10-year life with two one-year extensions, while the second funds have an 8-year life with two one-year extensions.
“We’re not buying properties betting on there being an increase in value,” said Bryan York Colwell, the firm’s other co-founder. “We always assume from a yield perspective that we’re going to lose on value. We don’t make assumptions about massive rent increases; we’re generating almost the entirety of our returns in this quarterly income stream.”
LCN’s average acquisition size ranges from $40 million to $80 million, but the firm will buy smaller and larger properties, he said. The firm’s most recent publicly-disclosed transaction was the April purchase of Lloyds Register, a suburban office property in Aberdeen, Scotland that is part of a business park, for £43 million ($44 million; €39 million), according to data provider Real Capital Analytics.
FocusPoint Private Capital Group is the placement agent for the fund series.
Founded in 2011, LCN now manages about $1.3 billion in capital.