Shorenstein closes Fund 10 on $1.1bn

Shorenstein Properties has closed its latest real estate fund, corralling $1.1 billion in equity commitments, PERE has learned.

The San Francisco-based firm closed its fundraising effort for Shorenstein Realty Investors 10 less than one year after initially launching the vehicle, which had an original target of $1 billion, according to Securities and Exchange Commission filings. Sources familiar with the matter said Fund 10 closed at the end of 2010.

Doug Shorenstein

One of the latest LPs to back the fund was the University of Michigan, which revealed last week that it committed $10 million to the vehicle. The university’s board of regents has committed more than $100 million across five investments to Shorenstein’s real estate funds, it said in an investment update dated 17 February.

Fund 10 will continue Shorenstein’s primary focus on US office properties, targeting “top-quality assets that by virtue of location, physical quality, amenities, tenant base or other outstanding features enjoy leasing advantages in their respective markets”, the Michigan investment letter stated.

The firm’s previous vehicle, Fund Nine, closed on $2.06 billion of commitments in 2007, and was just 40 percent invested when Shorenstein launched Fund 10, according to local media reports last March. Fund Nine’s investment period is set to expire this May, the report added. Fund Nine has acquired numerous office properties and a raft of mezzanine debt, including the mezzanine loan collateralised by equity interests in the owner of the two-building Santa Clara Towers in California. In March last year, Shorenstein assumed ownership of the offices when borrower Tishman Speyer handed back the keys after failing to restructure the buildings' debt.

Shorenstein, led by chief executive officer Doug Shorenstein, has also been an active seller of office properties over the past year, selling the Presidential Building at 1111 Pennsylvania Avenue NW in Washington DC for $220 million to Invesco Real Estate, which acquired the single-tenant building in October on behalf of an institutional client. Shorenstein originally acquired the office in 2004 in a joint venture with Mark Karasick, David Werner and Gotham Realty Holdings for $154 million, according to data provider Real Capital Analytics. It exited the deal at a 4.9 percent cap rate.

In August, Shorenstein also sold the 25-storey New York office property at 125 Park Avenue for $330 million, or a 5.7 percent cap rate. The office, which was 96 percent leased, was sold to SL Green – a 68 percent premium to the $225 million it paid for the property back in 2004, according to RCA.