As GreenOak Real Estate, the private equity real estate firm founded by ex-Morgan Stanley Real Estate Investing leaders, approaches the $5 billion fundraising mark, it is making plans to reduce its dependence on third-party capital advisors.
Last month’s hire of Gentry Ashmore Hoit was a significant part of this evolution. GreenOak appointed Hoit for the newly-established role of head of business development, making her a partner in the process. She joined from Park Madison Partners, one of a small handful of placement agents which the firm has worked with since Sonny Kalsi, John Carrafiell and Fred Schmidt founded it in 2010.
With March’s $655 million final closing of its second Asia fund, GreenOak has now completed fundraising on five commingled funds across the US, Europe and Asia. According to Kalsi, the time is now appropriate for the firm to adopt a more centralized approach to fundraising. “We’re a serial capital raiser,” he said. “We’ve used a lot of placement agents, but came to the view that we would be better served if we could do more in-house.”
Hoit will work closely with GreenOak’s head of capital formation, Julie Wong, providing investor services to the firm’s 50-plus institutional relationships. Kalsi also sees the role as forward-looking, with Hoit spending equal amounts of time managing existing investor relationships while also exploring nearly 200 new relationships that are seen as viable for GreenOak going forward. In terms of future initiatives, he said one area the firm would explore is tailoring more investment vehicles for particular investors.
“We made the decision at our start to anchor the business with commingled money, then to add on more bespoke products afterwards,” Kalsi said.
GreenOak is expected to build a business development team around Hoit and Wong. “There will be a number of new initiatives for us to be spending our time on,” he said.
GreenOak has spent more than $20 million on placement fees since its inception, working with the likes of Park Madison and Hodes Weill & Associates stateside and Capra Global Partners in Europe. Though Kalsi expected to continue working with placement agents in the near-term, over time, he said the firm would scale down their use. In fact, he did not expect to be working with placement agents within five years. “Yes, I’d be comfortable with that,” he said.
“Although we have had good success working with them, I don’t think that paying placement agents two points on a fundraise is a sustainable business model for a fund manager,” he remarked. “I believe you use them early in your life cycle, but once you reach a certain size in AUM, you need that function in-house.”
Anthony Biddulph, chief executive officer of London-based Capra, said GreenOak’s philosophy to internalize its capital formation function was understandable.
He said: “Coming from a background myself of working as an in-house capital raiser at BlackRock, I have always recognized that the caliber of the GreenOak team means that they will quickly reach a point where building that function internally will make more sense than hiring help. From the start, it has been Capra’s goal to help GreenOak on the way and I am proud of the success we have shared with them so far and continue to do. Their future is bright and at some point, our future will involve identifying the next GreenOak.”