Sculptor raises $250m for new non-traded REIT

Sculptor Real Estate, the New York-based private equity real estate firm formerly known as Och-Ziff Real Estate, has raised $250 million for a new vehicle for retail investors, PERE has learned.

The firm officially launched Sculptor Diversified Real Estate Income Trust in the second quarter of last year, with a view to capitalizing on opportunities arising from price corrections in the market. A spokesperson for Sculptor declined to comment, but PERE understands similar to the firm’s approach with its equity and credit funds, the focus of the REIT is non-traditional assets. In 2023, the REIT generated a 14 percent net return and produced a seven percent annualized distribution yield, according to documents filed with the US Securities and Exchange Commission last week.

The $250 million capital raise includes a $150 million founding commitment from an institutional investor, according to a person familiar with the REIT. A partnership with JPMorgan Private Bank was established last year, and the firm is working to formalize more distribution channels in order to access capital, the person said.

Sculptor has closed on its first capital for the vehicle at a time when fundraising for unlisted REITs has slowed considerably. So far this year, non-traded REITS have reported $899.2 million in fundraising, according to New Jersey-based investment bank Robert A Stanger’s most recent data.

Private REITs experienced a difficult 2023, with shareholders rushing to pull money out. In late 2022, Blackstone, along with industry peers including Starwood Capital and KKR, began limiting investor withdrawals as requests surged above their caps. However, those redemption requests are going down; in February BREIT fulfilled all of its repurchase requests for the first time since 2022.

Still, the vehicle type has proved popular, even amid the challenges. In addition to Sculptor, other managers that filed with the SEC to form nontraded REITs last year included Philadelphia-based EQT Exeter and Atlanta’s Invesco Real Estate. In February, Utah-based manager Bridge Investment Group launched Bridge Investment Group Industrial Real Estate Income Trust to provide wider investor access to industrial net leases. This week, Houston-based firm Hines announced a new platform for private wealth investors, and Dallas-based multifamily specialist S2 Capital is looking to raise $1 billion for a new private REIT.

In an increasingly crowded space for non-traded REITs, SDREIT has a different investment approach than other offerings, which often focus on multifamily and industrial assets. For example, BREIT’s portfolio is largely invested in rental housing, industrial properties and data centers, according to its website. As a new vehicle, Sculptor’s REIT also lacks the  legacy issues of some its more established counterparts.

As of the end of last year, Sculptor made two major investments through SDREIT, the first in taking a controlling interest in Chicago-based CapGrow Holdings, which owns over 1,000 single-family home units leased to and operated by care providers that serve individuals with intellectual or developmental disabilities. Its other investment, according to its annual report filed with the SEC, is a 90 percent equity interest in a joint venture that owns University Courtyard, a 240-unit, 792-bed student housing property located in Denton, Texas.