Metropolitan Real Estate’s close on its first secondaries fund last month marked a major milestone in the firm’s evolution under parent company The Carlyle Group.
New York-based Metropolitan had planned Metropolitan Real Estate Partners Secondaries & Co-Investments Program before Carlyle’s acquisition in 2013. David Sherman, Metropolitan’s co-founder and president, said Carlyle’s takeover came as the multi-manager was looking to access more global private money and upgrade its infrastructure.
“In our view, the world was changing rapidly in our space,” Sherman said of the market in 2013. “The conventional, traditional market for fund-of-funds, particularly for ultra-high net worth individuals and smaller institutions, was very small. But there was a larger demand for other types of products that we offer, such as secondaries and direct property co-investments.”
After acquiring Metropolitan, Carlyle kept the firm’s 40 employees and bolstered its office end by providing an online investor portal and access to tax, legal, sales and accounting staff that Sherman said the firm previously could have not afforded in-house or would have had to outsource to an independent entity.
But like almost any corporate merger, the transition was not always smooth. Sherman said it took about a year and a half to educate stakeholders, ranging from Metropolitan’s client base to Carlyle’s various departments.
By 2015, momentum began to build for the new fund, spurred by Carlyle’s sales force, which could access global clients and seed investments in the fund.
Metropolitan closed the fund in the middle of February at $550 million, above its $450 million target, with a co-investment of more than 1 percent from Carlyle. As of press time, Metropolitan has already completed 14 transactions out of the fund, six of which were secondaries and the remainder being co-investments.