Longpoint closes on second-largest US industrial fund this year

Longpoint has closed on its largest fund to date as well as one of the largest US industrial-focused vehicles of the year, PERE has learned.

The Boston-based manager raised approximately $940 million of commitments for its third fund, Longpoint Fund III, well over its original $750 million target. The firm launched the fund last year and collected $323.5 million in the initial close in December, according to PERE data.

The fund’s investors comprised a mix of global institutions, including sovereign wealth funds, public and corporate pensions, insurance companies, endowments, foundations and family offices, among others.

Among the limited partners were the Illinois-based pension plans Illinois Municipal Retirement Fund, State Universities Retirement System of Illinois and Chicago Teachers’ Pension Fund, as well as Los Angeles Water & Power Employees Retirement Plan and Texas Permanent School Fund, both of which committed $75 million to the vehicle, according to PERE data and pension documents. New York-based capital advisory firm Hodes Weill & Associates acted as placement agent for the fund.

Longpoint completed fundraising for Fund III in about a year, with existing investors making up the majority of the capital raised, according to managing and founding partner Dwight Angelini. However, in contrast to the firm’s prior funds, some of Longpoint’s investors were uncertain about how much capital they could commit to Fund III, because of changing conditions that included the denominator effect, portfolio write-downs and fewer than expected distributions from managers, he said.

“There’s so much movement that it was a little bit unclear how much people had to allocate for our fund,” said Angelini. “We had a couple of investors come in last minute and say, ‘actually, we got an allocation to this. So can you fit us in?’”

Fund III is the largest fund to date for Longpoint, which comes in at 166 on this year’s PERE 200 ranking, having raised a total of $1.04 billion over the past five years. The manager previously gathered $280 million against a $375 million target for Fund I in 2018, and $669 million against a $450 million target for Fund II in 2021, according to PERE data. Additionally, Longpoint closed on $225 million for a specialty grocer fund in March.

With Fund III, Longpoint will pursue the same value-add strategy as the prior funds in the series, acquiring well-located, underutilized industrial assets in major US markets at attractive prices. Specifically, the firm will focus on making small to mid-sized investments in Atlanta, Boston, Dallas, New York/New Jersey, South Florida, Southern California and Washington DC/Baltimore.

PERE understands the firm targets an internal rate of return of 15-17 percent for the fund series. Fund I was generating an IRR of 39.34 percent as of December 31, according to the Montgomery County Employees’ Retirement System.

With Fund III, the manager has closed on nine acquisitions to date, amounting to less than 10 percent of the fund’s total equity. They include the John Reed Commerce Center, a 275,600-square-foot, fifteen-building industrial park in City of Industry, California; 205 Jackson Street, a 32,000-square-foot cold storage distribution facility in Englewood, New Jersey; and 4520 36th Street, a 94,500-square-foot infill industrial asset in Orlando, Florida.

Longpoint Fund III is the second-largest North America logistics-focused real estate fund to close this year, after EQT Exeter’s EQT Exeter Industrial Value Fund VI, which amassed a total of $4.9 billion, PERE data showed. The vehicle is just one of four North American logistics funds that have reached a final close year-to-date, according to PERE data.

Industrial and multifamily remain the most popular sector-specific fund strategies in North America, attracting $6.29 billion and $13.18 billion in capital, respectively, in 2023 to date. The equity haul for industrial, however, fell far short of the $16.32 billion sought for the regional sector as of the end of Q3 – the second-highest amount when compared with capital targeted at year-end over the past five years, according to PERE data. By comparison, $11.56 billion was raised in 2022 against an aggregate target of $18.88 billion at year end, the data showed.

With many managers now raising industrial funds, “the question becomes, who actually has an industrial edge? Who actually knows these markets and who knows how to build and operate these buildings and understand their tenants?” Angelini asked.

Founded in 2015, Longpoint has invested in industrial properties throughout its history. Angelini and fellow founding partners Nilesh Bubna, Reid Parker and Robert Provost III also were active in the sector as senior members of the acquisitions and asset management teams at TA Realty, where they worked prior to launching Longpoint.

“The depth of knowledge in our sector, I think, was critical in our ability to raise capital,” Angelini said. “That was the key to a successful fundraise.”