RiverOak Investment has launched a new value-added fund targeting $300 million in equity commitments. The new fund, which will be called RiverOak Urban Retail Investors Fund I, will focus on repositioning street-level retail space in US cities with 24-hour central business districts, particularly Boston, New York, Philadelphia, Washington DC, Chicago, San Francisco and Los Angeles.
“We were looking for niches coming out of recession because a lot of the problems with broad-based funds were that it was hard to attract money unless you were a Blackstone or a BlackRock,” said Stephen DeNardo, RiverOak’s managing director and chief executive officer.
Urban retail is just such a niche because urban markets have been recovering significantly faster than suburban ones. Additionally, while many retail funds concentrate on malls or strip centres, “very few focus on the urban street-level storefronts,” DeNardo noted.
The new fund will be RiverOak’s first to focus on institutional investors. The firm’s previous four funds, launched between 1999 and 2007, had targeted high-net-worth individuals. The company began to expand its business to include institutional capital last year, when it formed a $150 million joint venture with TFO Investments, a Bahrain-based investor, to acquire medical office properties in the US.
“We are targeting a combination of large institutional pension funds, both public and private, and we are talking to some of the larger fund of funds and some new names that are out there that have capital to deploy,” said Lianne Merchant, a managing partner and principal at RiverOak, who will be heading capital-raising initiatives on behalf of the fund. Merchant, who joined the firm in March with the purpose of creating an institutional investor base for RiverOak, previously served as a placement agent for Park Hill Real Estate Group, a division of The Blackstone Group.
In particular, RiverOak will be reaching out to institutional investors that have capital set aside for emerging managers, DeNardo noted. “Because a lot of the large funds got hammered, investors are looking for smaller people who are hungry and who have niche ideas,” he said. “We’re hoping to capture some of that.”
The new fund features a single-promote structure, with RiverOak serving as operator of the properties. The firm, which currently is in advanced negotiations with one major investor, is hoping to hold a first close on the fund by early next year. A final close is slated for the end of 2012.