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Rockpoint launches new $1 billion fund

The new vehicle is the Boston-based private equity real estate firm’s first non-opportunistic US fund.

Rockpoint Group has begun marketing Rockpoint Core Plus Real Estate Fund (CPF), its first lower-risk, lower-return investment vehicle. The firm, which has raised and managed a series of opportunistic property funds, is seeking to raise $1 billion for the new fund from a limited group of existing Rockpoint institutional investors.

One such limited partner is the Oregon Public Employees Retirement Fund (OPERF), which committed $100 million to the fund this week. OPERF has invested in all six of Rockpoint’s fund offerings, including four opportunistic vehicles, since the firm’s founding in 2003.

The core-plus fund will target stabilized US commercial real estate properties with strong existing cash flows and less capital-intensive business plans than assets in Rockpoint’s opportunistic funds. CPF primarily will focus on equity investments in office and multifamily real estate in the US, although the vehicle also will allow for debt origination, preferred equity or debt acquisition opportunities as well as equity investments in other property types.

With its new core-plus strategy, Rockpoint will target 9 to 10 percent net returns and underwrite investments for a five-to-seven-year hold period. A significant component of the fund’s returns would come from current cash flows as well as modest appreciation through moderated capital expenditures, more effective leasing efforts or operational improvements to enhance net operating income at the asset level. The fund will not include development and be restricted to overall leverage of 50 percent.

“While this strategy does not have an existing track record to validate that thesis that existing deal generation and sourcing infrastructure will create the targeted investment opportunities, the Rockpoint team has had access and passed on a significant number of verified opportunities that fit the CPF investment profile,” OPERF real estate staff wrote in a recommendation to the Oregon Investment Council, which oversees the pension plan’s investments. Rockpoint anticipates assigning one dedicated manager on each US coast to the fund once the firm has begun investing the fund’s capital and assembling a portfolio of investments.

CPF most likely will consist of a small number of investors, with two limited partners able to comprise up to 75 percent of the vehicle’s total commitments. The fund terms also include an LP voting threshold of 75 percent of capital commitments and at least three investors on key fund decisions.

The launch of the new core-plus fund comes less than a year after Rockpoint held a final close on its most recent opportunistic vehicle, Rockpoint Real Estate Fund IV, which attracted $1.95 billion in commitments. Rockpoint Fund IV currently is projected to generate a net return of 16.5 percent and net investment multiple of 1.6x, according to OPERF documents. In aggregate, the firm’s opportunistic funds are projected to produce a 13.5 percent net return and 1.4x net multiple on invested equity, the documents said.