Morristown, New Jersey-based MetLife Real Estate Investors expects to hold a first close on approximately $1 billion for its debut commingled real estate offering, the open-ended MetLife Core Property Fund, PERE has learned.
According to sources familiar with the matter, MetLife is targeting an initial close by the end of this month. The firm expects the initial capitalization for the first close to be about $800 million in institutional investor capital along with $200 million of MetLife co-investment capital as well as about $400 million in debt. MetLife declined to comment to PERE.
MetLife, which has been building its third-party asset management business since fall 2012, seeded the fund with $1.4 billion of properties from its balance sheet, including 19 office, multifamily and industrial assets.Through its co-investment vehicle, MetLife will retain an approximate 20 percent interest in the property portfolio.
According to market sources, MetLife’s goal is for the Core Property Fund is for it to become a similar vehicle in nature as other major open-ended funds in the private market such as JP Morgan's Strategic Property Fund, Morgan Stanley's Prime Property fund and Prudential's PRISA.
The Core Property Fund has garnered plenty of interest from initial investors, including the Teachers’ Retirement System of Louisiana (TRSL), which approved a $150 million commitment to the vehicle at its December 5 meeting.
As TRSL was one of the fund’s founding investors, MetLife offered a reduced management fee. TRSL consultant Hamilton Lane cited this favorable fee structure along with MetLife’s “research driven investment approach,” ”significant track record” and “experienced real estate professionals” as reasons for committing to the fund.
According to Hamilton Lane’s presentation, MetLife’s seed property portfolio has outperformed the NFI-ODCE index since 2003, with an average annual cash yield of seven percent and an annual total gross return of 14 percent, representing a 700 basis point spread over the NFI-ODCE for the same period. Following the fund’s initial close, MetLife plans to grow the portfolio with new investments in the $30 million to $300 million range primarily in Tier 1 and Tier 2 markets.
Other early investors in the fund include the Alameda County Employees Retirement Association Board, which approved a $50 million commitment at its November 20 meeting, the Los Angeles Police and Fire Pensions Board, which approved $60 million at its November 7 meeting, and the New Mexico State Investment Council, which approved $50 million at its November 26 meeting.