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PGGM, APG were main LPs in GTIS’ latest fund – Exclusive

The New York-based private equity real estate firm had considered reopening the fund to new investors earlier this year.

GTIS Partners received the bulk of commitments for its latest Brazilian real estate fund, GTIS Brazil Real Estate Fund III, from two European investors, the Netherland’s second-largest pension fund, and Dutch pension fund manager APG Asset Management, PERE can reveal.

Both investors were understood to have each committed approximately $250 million to the fund, which gathered a total of $680 million, according to multiple people familiar with the fundraise.

The fund attracted capital from seven institutional investors, including the Illinois Municipal Retirement Fund, which was an early limited partner, earmarking up to $75 million in April 2014. About two-thirds of the equity in the fund came from existing investors, while the remaining third was raised from new investors. GTIS declined to comment on the investor base.

GTIS held an initial close of approximately $75 million in December 2014, against a target that was $750 million, according to a filing with the Securities and Exchange Commission. By March 2015, the target had been revised to $500 million and as of January, the firm had amassed $257.75 million for the fund, the filings said. PERE understands that the revised target reflected the devaluation in the Brazilian real, and was not a decrease in the actual amount of reais that the firm intended to invest in the Latin American country. In December 2014, R$1 was equal to $0.38 but had slipped to the equivalent of $0.31 by March 2015, according to xe.com.

GTIS held a final close on the fund in December, but had considered reopening the fund after receiving interest from other investors that did not make it into the final close. The firm had discussions with investors “for several months” before recently deciding not to reopen the fund, said Josh Pristaw, senior managing director at GTIS.

“It was more about the optimal size of the fund and what we could comfortably invest during the fund’s period,” added Tom Shapiro, GTIS’ president and founder. “There is more demand than product out there.”

Fund III is expected to be 30 percent committed by the end of the month. Investments will include a mix of office and industrial assets in the Brazilian cities of São Paulo and Rio de Janeiro. “The general theme is about buying existing assets at a discount to replacement costs and at significant discount to historical peak pricing,” said Pristaw. The firm will be seeking “typical opportunistic returns” for the fund.

“We’re at the market bottom, and the economy is starting to move,” Shapiro said. “We can buy a building for 40 cents on the dollar off peak prices.”

Shapiro also noted the lack of competition in both fundraising as well as investing in Brazilian real estate. Indeed, Fund III is one of only a handful of Latin American real estate funds to have closed in the past year. Other recent capital raises targeting the region include HSI attracting $700 million for HSI Real Estate Fund V; Jaguar Real Estate Partners capturing $350 million for Jaguar Real Estate Partners I and TC Latin America collecting $268 million for TC Latin America Real Estate Fund II.

GTIS previously raised $810.20 million for GTIS Brazil Real Estate Fund II in February 2012 and approximately $510 million in 2008-2009 for the inaugural fund in the series.