Scaling new heights

In more than doubling the size of its last vehicle, heitman has closed an $800m fund to invest in north American value-added opportunities.

Chicago-based Heitman has closed its second value-added fund on more than $800 million (€593 million), more than double the size of its first North America-focused vehicle. Heitman Value Partners II will be overseen by Tom McCarthy, a partner and 22-year veteran with the firm.

The fund will look at investments in the residential, office, industrial and retail sectors, as well as more specialized plays in medical offices, student housing and self-storage.

Maury Tognarelli, Heitman's chief executive officer, said that the common thread through the fund's various sector investments was that “they are all value-creation strategies.” He added that the fund's strategy could also entail physical improvements to the assets, as well as debt capitalization or entity restructuring.

The fund has already committed 41 percent of its capital, including investments in senior housing, data centers, condo hotels and offices. Tognarelli described a recent deal on the West Coast in the IT sector. “We acquired a portfolio of four buildings, of which half will be immediately converted into data centers,” he said. He added that the repositioning plan gives the firm options: It can expand its data center strategy into two of the buildings, while selling the other properties at a profit.

In addition to being twice as large, Heitman's new fund also has added Mexico to its mandate. Previously, the firm's North America focused funds had only invested in the US and Canada. Tognarelli said that the firm has been building up its knowledge of Mexican real estate over the past year.

The vehicle culled commitments from 20 new and existing institutional investors and has an investment capacity of more than $2.4 billion with leverage. Limited partners like the California State Teachers' Retirement System, the Colorado Public Employees' Retirement Association and TIAA-CREF all contributed to Heitman Value Partners I, which closed on more than $400 million in 2005 and had buying power of around $1 billion. CalSTRS reported that it has contributed $200 million to Heitman Value Partners II.

Founded in 1966, Heitman has more than $20 billion in assets under managment in the US, Europe and Asia.

Morgan Stanley raises largest ever real estate fund
The real estate division of Morgan Stanley has raised $8 billion (€6 billion) for a new international property vehicle, considered to be the largest private equity real estate fund ever raised. According to the firm, more than 45 percent of MSREF VI International has already been invested. The investment bank chipped in 20 percent, or approximately $1.6 billion, of the fund's total equity capital, with the rest coming from investors in North America, Europe, the Middle East and Asia. Last year, Morgan Stanley raised more than $8 billion in three separate opportunity funds: a $1.8 billion US-focused vehicle, a $2.2-billion special situations fund and $4.2 billion for MSREF V International.

Goldman closes $4bn property vehicle
Investment bank Goldman Sachs has raised $4 billion (€2.9 billion) for its Whitehall Street Global Real Estate 2007 vehicle. The firm's last private equity real estate fund closed on $3.2 billion in 2005. The same week, Whitehall acquired lodging REIT Equity Inns, which owns more than 130 mid-market hotels under the Courtyard, Hilton Garden Inn and Hampton Inn banners, paying $2.2 billion for the company. According to Bloomberg, Goldman has raised approximately $20 billion in equity for its Whitehall fund series since 1991.

Shorenstein raises $1.3bn for new fund
San Francisco-based real estate investment firm Shorenstein Properties has closed its latest fund, Shorenstein Realty Investors Nine, on $1.3 billion (€965 million). The valued-added vehicle will invest in office and mixed-use properties throughout the major US markets. Around 85 percent of the fund's previous investors reportedly returned to the firm's ninth vehicle, with the firm chipping in $100 million. Earlier this year, Shorenstein sold the John Hancock Center in Chicago to Golub and Company and Goldman Sachs' Whitehall Street Real Estate Funds for $385 million.

Principal closes $225m debt vehicle
Des Moines, Iowa-based Principal Real Estate Investors has closed on a new fund, Principal Mortgage Value Investors, to focus on investments in the value-added commercial real estate debt sector, including bridge loans and subordinated debt. The closed-end fund has raised $225 million (€166 million) in commitments from institutional investors, with 10 percent of the fund coming from the firm's insurance affiliate, Principal Life Insurance Company. According to a press release, the fund will use capital markets financing to increase the vehicle's returns and plans to issue a commercial real estate collateralized debt obligation early next year.

Blackacre changes name to Cerberus
New York-based Blackacre Institutional Capital Management, the property arm of Cerberus Capital Management, has changed its name to Cerberus Real Estate Capital Management. According to a statement, the name change was undertaken to “directly identify” the property affiliate with its parent. Founded in 1995, the unit is headed up by Ron Kravit.

Blackstone makes senior real estate hire
The Blackstone Group has hired Michael Nash as a senior managing director in the firm's real estate group. Nash has spent the past ten years with Merrill Lynch, where he led the firm's real estate principal investment group in the Americas. At Merrill, he was involved in high yield debt opportunities, including mezzanine, preferred and bridge equity investments, as well as direct equity transactions. Nash previously worked at Barclays Bank, where he focused on the restructuring and resolution of troubled real estate loans, and at the Bank of Nova Scotia. At Blackstone, Nash will be responsible for developing new business initiatives within real estate. He will be based in New York.

Warburg Pincus hires new managing director
Private equity firm Warburg Pincus has hired E. Davisson “Dave” Hardman as a managing director. Based in New York, Hardman will oversee the firm's global real estate investment activities. Prior to joining Warburg, Hardman was with Morgan Stanley where he was a managing director leading the firm's US property investing. Hardman also served on active duty as an infantry officer with the US Army. Last year, Warburg Pincus closed its first dedicated private equity real estate fund on $1.2 billion (€900 million).

Peter Gilbert to become CIO of Lehigh University
Peter Gilbert, the chief investment officer of the Pennsylvania State Employees' Retirement System, has resigned from the pension fund and will take over as CIO for Lehigh University's Endowment Fund later this summer. Gilbert has been at SERS since 1993. At Lehigh, Gilbert will manage a much smaller pool of assets than he did while at SERS, which had approximately $32 billion (€25 billion) in its pension fund at the end of last year. Lehigh's Endowment is just over $1 billion.

Thomas Hutchison to join KSL Capital
Travel and leisure-focused private equity real estate firm KSL Capital Partners has named Thomas Hutchison as a senior advisor. Hutchison will also serve as a senior advisor to KSL Resorts, a KSL portfolio company that manages six resort properties. Hutchison was most recently the chairman and chief executive officer of CNL Hotels & Resorts, a publicly traded hospitality REIT that was sold earlier this year to Morgan Stanley and Ashford Hospitality in a $6.6-billion (€5 billion) transaction. Prior to joining CNL's parent company in 2000, Hutchison ran a number of real estate services and development companies, including Atlantic Realty Service, TJH Development and General Development Corporation.

Harrison Street hires new general counsel
Chicago-based private equity real estate firm Harrison Street Real Estate Capital has hired Stephen Gordon as a principal and general counsel. Previously, Gordon was a tax attorney at law firm DLA Piper and has experience working with joint ventures, public REITs, private equity funds and institutional investors. Gordon received a JD from the University of Michigan, an MBA and bachelor's degree from Michigan State University.