Northwood Investors has closed its debut fund on $1.25 billion (€797 million) with plans to target distressed real estate assets, debt and sellers in the US.
The Northwood Real Estate Partners I fund – the first venture from John Kukral following his departure as head of real estate at The Blackstone Group in 2005 – will also look overseas, according to Northwood chief operating officer Erwin Aulis.
Speaking to PERE, Aulis said the fund would concentrate on “points of stress” in the market following the credit crunch, most notably in the hospitality sector and where capital structures were struggling because of over-leverage and an inability to access equity.
One of the unique selling points of the fund has been Kukral's insistence on a developing an “evergreen” structure, Aulis added. The fund, split into a $750 million main fund and a $500 million sidecar, can hold assets for up to 15 years. After an initial five year period, investors can also increase or reduce their exposure to NREP I, choosing to either “recycle profits” or capitalize on gains. Northwood will also able to raise a limited amount of additional capital for the fund.
Aulis said the structure, very much the brainchild of Kukral, had been an important selling point to investors allowing them to take a much longer-term view of the market rather than being forced to sell assets before full profits had been realized. Investors included endowments, foundations, high-net-worth individuals and private pension funds as well as a Middle East institution.
The chief operating officer added that the structure would also allow Northwood to concentrate on investments rather than raising money every two to three years. “It is different from your typical private equity real estate fund,” Aulis said. “It's about not being forced to sell assets before you've realized their full value. We're just taking a longer-term view of the real estate market.”
Kukral was named one of PERE magazine's 10 fund managers to watch in June after he left Blackstone to set up his own operation. As president of Blackstone Real Estate Advisors between 2002 to 2005, Kukral was fundamental in helping the firm close its fourth and fifth real estate vehicles on €600 million and $2.05 billion respectively, as well as helping close the acquisition of the Extended Stay America hotel group for $2 billion, with the assumption of $1.13 billion in debt. In 2004, the hotel group was sold by Blackstone three years later for $8 billion.
H1 fundraising on pace to break records
Private equity real estate funds are on course to raise more capital in 2008 compared to 2007, according to proprietary data from PERE magazine. Firms around the world raised $40.2 billion (€25.5 billion) in dedicated value-added and opportunistic funds in the first half of 2008 compared with $30.4 billion raised in the first half of 2007 – a year-on-year increase of 32 percent. During the whole of 2007, a total $74 billion was raised in private equity real estate funds. Europe-focused vehicles accounted for 42 percent of the total capital raised during the first six months of 2008, with funds targeting the Americas accounting for 31 percent. Asia and the rest of the world saw 15 percent of the capital raised targeted to their regions, while global funds made up 12 percent.
Giuliani launches $750m opportunity fund
Rudolph Giuliani's consulting firm, Giuliani Partners, has launched a real estate opportunity fund in partnership with developer Berman Enterprises targeting up to $750 million (€472 million) in equity commitments. The firm, founded by the former New York City mayor after he left office in 2002, said in a statement the fund would “likely total” between $500 million and $750 million, of which Rockville, Maryland-based developer Berman was contributing at least 10 percent. The fund is expected to target non-US investors and concentrate on commercial and residential assets in New York and Washington DC. Giuliani is expected to help attract investors into the fund, a report in the New York Times added. The fund will be managed for New York-based Giuliani Partners by managing directors Geoffrey Hess and Anthony Carbonetti.
Apollo RE closes $758m value-add vehicle
Apollo Real Estate Advisors has held a final closing on $758 million (€482 million) for its Apollo Value Enhancement Fund VII. The predecessor fund closed on $276 million in 2006. Apollo Value Enhancement Fund VII will invest across property sectors, with a focus on value-add investments in the US. Apollo partner Steven Wolf will oversee the firm's Value Enhancement Funds, which have raised a total of $2.7 billion in capital. Fund VII recently purchased the 20-story Hilton Dallas Lincoln Centre in Texas for $72 million. In May, New York-based Apollo held a first close on its Apollo Domestic Emerging Markets Fund, securing $525 million in commitments. The fund, to be headed by Apollo partner James Simmons, will focus on “sub-markets” in the US.
Rowan heads GE's Americas group
GE Real Estate has appointed Michael Rowan as president of its Americas Equity group. Rowan, who was formerly managing director for GE Real Estate's UK region, will be responsible for leading the firm's equity investments, including venture and direct investments and the firm's Arden and InterPark operations. He will also oversee its Canadian, Mexican and South American investment. Rowan has been with the firm since the early 1980s, most recently as managing director for the UK where Rowan grew assets for both debt and equity from around $2 billion (€1.3 billion) to more than $8 billion.
Grubb & Ellis expands RE team
Grubb & Ellis Realty Investors, the real estate investment and asset management arm of Grubb & Ellis Company, has hired former founding principal of Meridian Value Partners, John Caley, to join the firm as senior managing director for real estate. Caley will oversee acquisition and disposition for the Santa Ana, California-based firm's commercial real estate investment programs. Prior to joining Grubb & Ellis Realty Investors, Caley was managing director and founding principal of Meridian Value Partners, where he was responsible for acquisitions, capital raising and operations.
CBRE hires former Ciena Capital exec
CB Richard Ellis has hired Frank Scavone to join the firm as a senior managing director. Scavone will be based in New York and will work with CBRE executive managing director Ethan Penner to develop new investment programs. Scavone was previously executive vice president of product, portfolio and capital markets for Ciena Capital, developing debt and preferred equity products.
RE execs say market is much worse now
Real estate chief executives have warned the US market is deteriorating in terms of accessing capital and debt, with almost nine out of 10 senior professionals saying the situation was now “much worse” than one year ago. According to the US Real Estate Roundtable's latest quarterly report published last month, 95 percent of senior real estate investors and operators felt that access to debt financing had reduced over the past 12 months, with 74 percent stating that availability of equity capital had also declined over the same period. In a general assessment of the state of the market in the US, 41 percent of respondents said the outlook for the commercial real estate market was now “much worse” than last year – compared to just 31 percent in April. Jeffery DeBoer, president and chief executive of the Roundtable, the US trade body representing chief executives in the commercial real estate industry, said the industry was entering “unchartered territory.”