Man Group is marketing its latest real estate fund targeting the US single-family residential sector, PERE has learned.
The new vehicle, Man GPM US Residential Real Estate Fund, is the London-based investment manager’s first commingled property fund since Man Group acquired Aalto Invest last year.
Prior to the acquisition, Aalto itself closed on only one commingled fund in 2012, and has subsequently raised and invested capital through three separately managed accounts.
Man Global Private Markets, which is the private markets investment management arm of Man Group, registered Man GPM US Residential Real Estate Fund with the Securities and Exchange Commission last week, having so far raised $25 million, according to a filing with the commission earlier this month. That capital is understood to be seed money from Man Group, according to sources familiar with the matter. Man Group declined to comment.
Man GPM US Residential Real Estate Fund also is the first open-ended real estate fund for Man Group, sources said. Aalto previously had raised and invested only closed-ended vehicles but changed the investment structure for its latest fund as a result of investor demand for greater liquidity.
The new fund would have a 40-60 percent target allocation to a buy-to-rent strategy within the single-family residential sector; a 20-30 percent target allocation to a build-to-rent strategy; and a 0-20 percent target allocation to a build-to-sell strategy. The geographic focus will be on growing US cities with strong employment in the southeast and midwestern US, as well as California.
The firm targets newer housing stock, with the average of its properties around 10 years, to minimize ongoing capital expenditure costs and reduce downtime between leases; homes in proximity to good schools to attract higher quality prospective tenants; and tenants with an average household income of $90,000.
The core-plus fund will target returns in the 10-12 percent range with leverage and in the high single digits without leverage. The loan-to-value ratio for investments will range between 30 percent and 50 percent.
Other private equity real estate firms that have been active in the US single-family residential sector in more recent months include GTIS Partners, which formed a US housing joint venture with the California State Teachers’ Retirement System last year; and Encore Capital Management, which is understood to have launched its third opportunistic fund targeting the US for-sale residential sector this year.
Since 2012, Man Group/Aalto have invested $2.4 billion in 12,000 single-family homes in the US. The firm currently manages approximately 3,800 single-family rental properties representing more than $750 million in assets under management across 16 metropolitan areas in the country.
The real assets team of Man Global Private Markets, which is the private markets investment management arm of Man Group, is led by co-heads Mikko Syrjanen and Petteri Barman, who founded Aalto in 2010. The team currently comprises 28 investment professionals across its offices in London; Charlotte, North Carolina; and Pfäffikon, Switzerland.
Man GPM, which is one of Man Group’s five investment platforms, managed $800 million of equity in direct real estate, with a focus on residential assets in the US; and $1.3 billion in real estate debt in the US and Europe as of March 31. Man Group managed $112.7 billion in overall assets as of that date.