Lubert-Adler Real Estate is raising a $400 million co-investment vehicle to bolster the firepower of its existing opportunistic fund, the $2 billion Fund VI.
The Philadelphia-based private equity real estate firm last month secured a $100 million commitment from the New Jersey Division of Investment, in a new relationship for both GP and LP.
However, the co-investment vehicle – Lubert-Adler Real Estate Fund VI-B – will only be used for new deals and will be banned from investing in legacy assets held by Fund VI, which closed in 2007, and another co-investment fund, Fund VI-A, which was raised at the same time.
According to New Jersey pension fund documents, Fund VI-B is not charging any management fees until June 2013 and will be allowed to invest up to 40 percent of the equity needed for each deal. New Jersey will hold an advisory board seat for the vehicle.
Sources familiar with the matter said the vehicle was being raised to give Lubert-Adler additional firepower to source distressed US debt and equity deals. With Fund VI still not fully invested, the firm was unable to raise a new commingled fund. However, existing LPs were happy for additional equity to be brought alongside their fund.
New Jersey added that the co-investment fund would target discounted loan payoffs and the subsequent recapitalisation of borrowers and assets. Lubert-Adler was unavailable for comment at press time.
For New Jersey, the fund – which will run through the end of 2016, mirroring Fund VI – marks the start of what could be its major re-emergence in the asset class. The pension plan is looking to increase its allocation to alternatives by 10 percent to 38 percent, with the real estate target allocation expected to rise 2 percent to 9 percent.