Realstar shoots for private equity fund

Canadian privately-owned real estate investor, RealStar Group, is entering into private equity real estate territory by seeking to raise a €300 million opportunity fund to acquire assets in both the UK and Continental Europe.

Realstar Group is tapping third party investors for a €300 million ($469 million) debut vehicle, Realstar European Capital I.

The Canadian firm with €4 billion of assets has revealed it has already garnered the majority of commitments and expects a final close by the end of the year.

The discretionary opportunity fund would have capacity to acquire up to €1.2 billion across the UK and Europe once all the commitments are signed, according to a statement.

The fund is targeting the hospitality, leisure and residential sectors, but the firm added it would not be limited to those areas. Other alternative property sectors such as student accommodation, retirement communities, and self-storage are on its radar.

In the UK, Realstar is best known for its £1 billion acquisition of 73 Holiday Inn and Crowne Plaza hotels from InterContinental Hotels in 2005, in a joint venture with Lehman Brothers Real Estate Partners and an affiliate of the GIC Real Estate, the government of Singapore’s investment arm. It was the largest hotel transaction in the UK at that time. As well as hotels, Realstar is a large investor in the UK primary healthcare market, owning a nationwide portfolio of primary healthcare centers let to NHS doctor partnerships.

The firm launched international activities by opening a London office in 2002 run by chief executive officer of Realstar International, Ryan Prince. It specializes in operating the assets it owns. In addition to its owned estates, the firm also manages properties on behalf of several major Canadian pension funds including BC Pension and OP Trust.

Of the new fundraising activity, Prince said, “Having remained patient over the past three years in what we felt was a relatively over-heated market, we now anticipate the next three years will offer more attractive risk-adjusted returns.”

Prince said the investment strategy was focused on back to basics. “Refurbishment, repositions, extensions of unloved or under-capitalized assets are key tenets of our approach,” he said, adding that the firm would also consider taking on development projects with local partners.

He also commented on the possibility of companies requiring re-capitalizations across the capital structure. “We see a gap appearing in the mid-market for assets of €50 million to €200 million requiring equity commitments of between €10 million to €50 million,” he said.