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Terms of Landmark’s Fund VIII revealed – Exclusive

Landmark Partners expects to wrap up fundraising by the end of the year for its latest real estate secondaries fund, according to Connecticut's pension plan.

Connecticut Retirement Plans and Trust Funds is considering a $65 million commitment to Landmark Partners’ latest real estate secondaries fund, according to board documents from its Wednesday meeting.

The documents revealed several key terms of the fund series. A spokeswoman for Landmark declined to comment.

Simsbury, Connecticut-based Landmark launched Landmark Real Estate Fund VIII in the fall with a $2 billion target and a $2.75 billion hard-cap, PERE previously reported. The firm held a first close for the vehicle in December on $260 million and an interim close in February with an additional $245 million, according to CRPTF. Landmark, which has a GP commitment of 1 percent of the vehicle’s capital, expects to close the fund later this year.

The firm closed the predecessor vehicle on its $1.6 billion hard-cap in May 2015 after 14 months of fundraising, PERE previously reported.

With capital from the fund series, the firm invests largely in non-control, minority limited partner positions in commingled funds. About 30 percent of the fund’s capital is likely to be invested outside of the US, with transaction sizes varying between $1 million-$1 billion. Fund VII’s average deal was $46 million. Its loan-to-value ratio is capped at 70 percent, although the three predecessor vehicles have not exceeded 60 percent leverage.

Landmark has a 14-16 percent net internal rate of return target for Fund VIII. The predecessor vehicle generated a net IRR of 36.7 percent as of December 31. Fund VI, a 2010-vintage vehicle, generated a 21.6 percent return as of year-end.
Fund VIII has a 1 percent management fee, 8 percent preferred return and 12 percent carried interest.

Landmark is raising its real estate fund as the overall real estate secondaries market volume declined from $7.5 billion in 2015 to $4 billion in 2016 because of smaller sales and fewer portfolio deals, according to CRPTF meeting materials. However, Townsend Group, the pension system’s real estate consultant, noted that future transaction volume is expected to increase, as the amount of capital committed to new real estate funds rises and sellers continue to use the secondaries market to manage their portfolios.

Similar to the fund series, Fund VIII has a “very long life,” wrote Townsend, because of its four-year investment period and the long lives of the underlying investments. Funds IV and V, for example, are not fully realized, with vintage years of 2001 and 2005, respectively.

Fund VIII has one seed asset, a $50 million purchase in February of LP interests in a portfolio of assets across the risk spectrum in Washington, DC.

Other investors in the vehicle include the Nebraska Investment Council, which earmarked $40 million, the Arkansas Teacher Retirement System, which allocated $25 million and the San Diego City Employees’ Retirement System, which committed $20 million, according to PERE data.

Landmark Partners manages $15.5 billion in committed capital, according to its website.