Stepstone buys stake in HRI

StepStone Real Estate has purchased an interest in HRI Properties, a multi-sector real estate developer and owner, the firms said Tuesday.

New York-based StepStone bought the stake for $87.5 million, according to the announcement. Further terms of the deal were not disclosed. The firm has made similar investments with other managers since 2010, a source with knowledge of the deal told PERE.

New Orleans-based HRI develops, acquires, owns and manages branded and independent hotels, upscale apartments and mixed-use properties in major urban US markets. The firm’s last publicly disclosed transaction was the November purchase of a Country Inn & Suites in New Orleans in a joint venture with Rockbridge Capital for $39 million, according to data provider Real Capital Analytics.

HRI primarily focuses on urban in-fill projects and the adaptive reuse of historic buildings. The company owns and operates a portfolio with more than 3,000 hotel rooms, 1,500 apartments and 165,000 square feet of commercial space. HRI also provides third-party hotel and apartment management services through its subsidiaries HRI Lodging and HRI Management.

The investment will fund the continued expansion of HRI’s portfolio into growing urban markets, according to the announcement.

“The HRI investment provides us with diversified exposure to high quality assets in major urban markets,” Brendan MacDonald, a StepStone Real Estate partner, said in Tuesday’s statement.

Capital for StepStone’s purchase came from its latest fund, StepStone Real Estate Partners III, which closed on $700 million in capital commitments and $400 million in co-investment capital last month, PERE previously reported. StepStone is targeting gross returns in the mid-to-high teens for the vehicle.

Almanac Realty Investors has also invested in HRI through two rounds of capital commitments. The New York-based firm initially wrote a $150 million check to the company in 2014, then followed up with an additional $50 million in March 2016, according to statements at the time.

StepStone Real Estate is the real estate division of StepStone, which also invests in private equity, infrastructure and real assets, private debt and hedge funds. It has $28 billion in assets under management, with 14 offices in 10 countries, including in New York, San Francisco, San Diego, Toronto, London, Zurich, Beijing, Hong Kong, Tokyo, Seoul and São Paolo.