As a means of increasing its retail exposure within its real estate investment portfolio, the University of Michigan has approved a commitment of $15 million to a first-time real estate fund sponsored by The Sterling Organization. The fund will target retail centres in select markets within the US.
According to documents from the University of Michigan’s Board of Regents, the fund, Sterling Value Add Partners, is a value-added commingled vehicle seeking $125 million in equity commitments. Through the fund, the Palm Beach, Florida-based real estate investment firm will “acquire, manage and lease income-producing, grocery-anchored shopping centres located in Sterling’s target markets of Florida, Texas and Chicago.” It also will make some investments in North Carolina and Atlanta.
“An investment in Sterling Value Add Partners is consistent with the University’s real estate investment strategy to invest with managers that have demonstrated the ability to add value,” documents from the University stated. “In addition, it is an opportunity to increase retail exposure, which is an under-represented sector in the University’s real estate portfolio.”
Sterling intends to acquire assets from distressed sellers and banks at depressed prices. The firm will create value by improving occupancy and tenant mix, increasing rents, making renovations and cutting operating costs. The properties will then be sold upon completion of the improvements.
The investment period for the fund is three years with one one-year extension. The management fee is 1.5 percent on committed capital during the investment period, then 1.5 percent on funded commitments thereafter.
The University of Michigan’s commitment to Sterling’s fund follows recent contributions of €15 million to BLG Capital’s Turkish opportunistic vehicle, BLG Turkish Real Estate Fund, and $35 million to The Related Companies’ $825 million Related Real Estate Recovery Fund.