New York-based real estate investment manager Savanna has sold a minority equity interest to an investor consortium led by Tunbridge Investment Partners, the principal investing platform of New York-based real estate advisory firm Hodes Weill & Associates, PERE has learned.
The consortium also includes New York-based Kudu Investment Management, which specializes in providing permanent capital to investment managers. Terms of the transaction were not disclosed.
The TK Partners investment will go toward further strengthening Savanna’s platform, including funding working capital and various platform, investment, staffing, and growth initiatives.
“This capital will enable us to continue to invest in our platform and people, and most importantly, to invest more in our existing and future investment vehicles, alongside our institutional partners,” said Chris Schlank, founder and co-managing partner of Savanna.
Nick Bienstock, co-managing partner of Savanna, added: “While there will be no changes to Savanna’s strategy, investment processes or day-to-day operations – and Savanna will continue to be overseen by its founders and principals – we expect that we will be able to leverage the industry expertise and relationships of our new partners.”
The transaction marks the first investment by Tunbridge, which focuses on acquiring minority equity stakes in middle-market real estate- and other real asset-focused investment managers globally. Similar to Kudu, the firm also intends to be a permanent capital provider.
Tunbridge first approached Savanna, which did not run a sales process, about a potential minority interest sale two years ago, but discussions did not pick up steam until around four to five months ago, said Doug Weill, managing partner at Hodes Weill. “The need became more apparent over time for the capital,” he told PERE. “They were hitting a point in their growth that it made more sense.”
When Tunbridge was established three years ago, the acquisition of minority stakes in managers “was a pretty new concept for the industry,” said Weill, noting that the firm had spoken with more than 150 managers during that period about its investment strategy. “Since then, it’s become more common in the market. You’ve seen large, well-established managers like Starwood, CIM and Rockpoint do transactions. That has validated the financial strategy of selling a minority interest. The whole industry’s thinking has evolved in those three years.”
Added David Hodes, managing partner at Hodes Weill: “We are actively evaluating additional opportunities to grow the Tunbridge platform and believe that our investment thesis is particularly compelling as global institutional investors continue to increase their allocations to real estate.”
Tunbridge was launched in 2015 by Hodes Weill, a firm best known for its advisory and capital raising services, and former Credit Suisse executives Brian Finn and Sean Gallary. Although Gallary left the firm last year to join Alpinvest Partners, Finn remains chairman of Tunbridge. Principal Keith Funston runs the firm’s day-to-day business and also led the execution of the stake purchase in Savanna on behalf of the buyer consortium.
Founded in 1992, Savanna has a team of more than 30 professionals, and has more than 80 investors that include public and private pension funds, insurance companies, sovereign wealth funds, high net worth family offices, foundations and wealth management companies. Focused on the New York City market, Savanna has raised four value-add real estate funds: Savanna Real Estate Fund I, a 2006-vintage fund that raised $313 million against a $400 million target; the 2011-vintage Fund II, which netted $550 million, significantly above its $400 million goal; the 2013-vintage Fund III, which collected $440 million of a $650 million target; and the 2016-vintage Fund IV, which attracted $591 million against a $600 million equity goal.
Although their respective founders and principals have known one another for 20 years, Savanna and Hodes Weill had not worked on transactions together previously, either from a capital raising or advisory perspective.
Park Hill acted as placement agent for all four of Savanna’s funds – an arrangement that is not expected to change under Tunbridge’s partial ownership of the firm.
Hunton Andrews Kurth served as legal counsel to Savanna, while law firm Skadden advised Tunbridge and TK Partners.