Summit launches first institutional fund – Exclusive

Summit Real Estate Group is looking for institutional capital for its third vehicle, PERE has learned.

The St. Louis-based firm was founded in 1995 with a focus on US industrial real estate and started raising funds through friends and family in 2010. Now, the firm is preparing to launch ArrowRock Income & Growth Fund III by year-end, seeking $200 million from an investor base that could include funds of funds, endowments and foundations, private and public pensions, insurance companies and family offices.

The firm declined to comment on fundraising.

Summit closed Fund I in June 2011 on $22 million and Fund II in March 2015 on $40 million.

Now, PERE understands that Summit sees the opportunity to raise more capital in a property type that has become increasingly attractive to institutional investors, particularly as e-commerce continues to expand. The firm has built out its executive team and geographic footprint, adding former CBRE Capital Advisors vice president Michael Tussie as managing director in April to open its New York office and lead fundraising.

With capital from Fund III, Summit will continue its focus on multitenant warehouses that cater to small and medium-sized businesses in the south-east, mid-Atlantic and south-west US. Its average acquisitions range from $3 million-$20 million, and about 20 percent of the fund is allocated to development properties. Summit focuses on aggregating portfolios that can be sold to institutional buyers.

The firm has a 13-15 percent net internal rate of return target for Fund III. Fund I, which invested in six properties, has generated a 23 percent levered internal rate of return and a 14 percent unlevered IRR, while Fund II, invested in nine assets, has a 21.3 percent levered IRR and an 11.6 percent unlevered IRR.

One purchase out of Fund II was the 304,000 square foot Royal Woods warehouse property in the Atlanta suburbs. Summit bought the property in the first quarter of 2017 for $12.5 million, 20 percent below its last sale price in 2006. Since acquisition, Summit has raised occupancy for the four-building warehouse from 59 percent to 72 percent.

The firm was founded by John Ross, a former vice president of now-defunct St. Louis real estate company Nooney Krombach. Summit manages about $500 million in assets.