Michigan commits to four RE funds

The University of Michigan plans to add its real estate holdings at its Board of Regents meeting Thursday, according to a meeting agenda.

The Ann Arbor-based University is expected to commit £25 million ($37 million) to Mercer Real Estate Partners II, a London-based real estate fund that will make office and mixed-use property investments throughout the UK, primarily in London. Mercer makes deals in the £10 million to £30 million range. The firm was founded in 2010 by Michael Kovacs and Brandon Hollihan, who previously worked together at Westbrook Partners, one of Michigan’s existing real estate managers.

Michigan also disclosed commitments that it previously made to three real estate fund managers last year. The endowment wrote a check to Spear Street Capital for SSC V, a fund run by the San Francisco-based real estate firm to purchase urban offices for technology and media tenants in hubs across the country, including San Francisco, Silicon Valley, Seattle, Austin, Boston, Chicago and Los Angeles. The university committed $46 million to the vehicle in August.

Real estate titan and Michigan alumnus Sam Zell saw more dollars from his alma mater with further allocations to Zell Equity lnternational Fund VI and Zell Equity International Fund VI Special Opportunities Fund. In August, the university committed $40 million and $24 million to the vehicles, respectively. Chicago-based Equity International buys real estate in regions with strong economic growth and a growing middle class, and the sidecar vehicle is set up to provide additional capital when an investment exceeds $100 million. Last year, Zell pledged $60 million to the university’s Samuel Zell & Robert Lurie Institute for Entrepreneurial Studies, which he helped set up in 1999.

Finally, Michigan also added capital to an Istanbul-based fund’s co-investment vehicle sponsored by private equity real estate firm BLG Capitai and the Bilgili Group. In 2013, the university committed €25 million to BLG Turkish Real Estate Fund II, which invests opportunistically in real estate assets in Turkey, with a focus on Istanbul. The co-investment fund will deploy capital to the redevelopment of Istanbul real estate located along the Bosphorus, a 20-mile strait with projects that includes a luxury hotel, high street retail, class A office and a passenger cruise port. In July, Michigan committed €10 million to the Galata port co-investment offered by the fund.

Michigan has the third-largest endowment among public universities with $11.6 billion, as of June 30. The endowment had a 3.5 percent return for the fiscal year ended June 2015.