Savanna closes $550m Fund II

Savanna Investment Management has closed its second institutional real estate fund on $550 million. The New York-based firm said in a statement that Savanna Real Estate Fund II had exceeded its original target of $400 million. Park Hill Real Estate Group acted as placement agent.

Savanna Real Estate Fund II raised commitments from a mix of US and international investors. In November, the Ohio Police and Fire Pension Fund committed $30 million to the office fund, which concentrates on office properties in prime cities such as New York, Washington DC and Boston. That followed another $30 million commitment from New York Common Retirement Fund, which invested in the Savanna fund in August through Franklin Templeton Real Estate Adviser’s fund of funds, the Lake Montauk Real Estate Fund. New York had never invested with Savanna before, the public pension said at the time.

Co-founder and managing partner Nicholas Bienstock said the fund’s closing was a “significant milestone” for the firm, during “a very difficult period for fundraising”. The firm raised $313 million for its debut institutional fund in 2006.

In the March issue of PERE magazine, it was revealed that Savanna expected to deploy around $200 million in equity in New York in 2011, sourcing between four to six distressed transactions, primarily office deals. Bienstock and co-founder and managing partner Chris Schlank said the attention being paid to core office assets in Manhattan was ensuring competition for all real estate sectors in the city remained high. But Bienstock added: “It’s always been hard to find good deals in New York.”

Savanna therefore would continue to target over-leveraged sellers and financial institutions struggling to cope with “zombie properties”, where an inability to finance tenant improvements and leasing commissions was hitting occupancy levels. “New York has some extremely encouraging demand drivers that still make the city an attractive investment location,” said Bienstock, citing fewer than expected financial services job losses and lower vacancy levels. “The financial services sector is starting to hire again and is back in expansion mode. It’s slow growth, but it’s an indication that the New York market has hit bottom, has stablised and is working its way back up again.”