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Och-Ziff raises biggest real estate fund yet

The New York-based hedge fund manager held a final closing for its third opportunistic real estate fund, Och-Ziff Real Estate Fund III, on $1.5 billion - 50 percent more than originally targeted.

Och-Ziff Real Estate, the opportunistic real estate investment arm of New York-based hedge fund manager Och-Ziff, has raised $1.5 billion for its third fund, the most raised by the firm for the asset class to date.

Och-Ziff was understood to originally have targeted $1 billion for the vehicle but, like other well-performing platforms in the sector, the firm has found itself inundated with institutional support, enabling it to bring aboard 50 percent more equity.

The capital has come from institutions, including pensions and endowments predominantly from the US, where the bulk of the fund’s investments will be. However, it is understood that as much as 20 percent, or $300 million of the capital, can be deployed outside of the US. After staffing up in London, that effectively means that capital could be deployed in Europe. 

In July, PERE revealed that David Gillerman, who was head of Och-Ziff’s European real estate activities, was to leave the firm. His function was replaced by a team of more junior executives, some hired from rival firms and others drafted from the firm’s existing ranks.

The European real estate team currently comprises: Boris Michev and Kyle Streitburger, both of whom joined from The Blackstone Group; Bert Broadhead, who joined from London-based Rocksprings Property Investment Managers; and David Law and Francesco Ragazzi, both of whom already worked for Och-Ziff. They all report to the firm’s real estate head in New York, Steve Orbuch.

Och-Ziff will be looking to carry on a strong track record of investing in the asset class. Though small in comparison to its $40 billion-plus hedge fund business, Och-Ziff Real Estate nevertheless is generating net returns of 15.5 percent and a 1.5x equity multiple for its first fund, which was raised in 2005, according to the New York Division of Investment, one of its investors. The pension noted that its second fund is generating net returns of 20.2 percent IRR and a 1.2x equity multiple.

Och-Ziff has yet to put meaningful capital from the new fund to work, although debut deals in Europe are expected to transpire before the year is out. The firm declined to comment.