Westbrook Partners has closed its ninth and latest global value-added real estate fund after nearly a year of fundraising. Documents filed with the US Securities and Exchange Commission reveal that Westbrook Real Estate Fund IX has closed on approximately $1.6 billion in equity commitments – slightly below the firm’s original target of $2 billion.
Although representatives from Westbrook declined to comment, market sources have told PERE that the New York-based private equity real estate firm opted to close the fund now because its fund management team believed it would be better to hit the market and get the capital working rather than extend the fundraising period to collect additional contributions.
The capital that Westbrook raised for Fund IX came from 78 institutional investors. This includes early commitments of $200 million apiece from the endowments of Harvard University and the Massachusetts Institute of Technology.
Throughout this year, the firm also received commitments from the Teacher Retirement System (TRS) of Texas, the Arkansas Teacher Retirement System and the New York State Teachers’ Retirement System. Although Westbrook did not use a placement agent for existing investors, the firm hired Probitas Partners to seek capital from new investors.
Through the value-added vehicle, Westbrook will seek to invest across all property types in New York, Washington DC, San Francisco, Los Angeles, London, Paris and Tokyo. The firm will seek to invest primarily in existing properties as opposed to development deals and is targeting a gross IRR of 18 percent.
PERE learned that Westbrook had changed the profit-sharing structure for Fund IX from a deal-by-deal to a pooled basis, which means gains and losses will be netted out before profits are divided between the firm and its LPs. The firm also eliminated a previously used “catch-up” provision, which entitled Westbrook to a larger share of the profits after the LPs receive their preferred return. In exchange for that concession, Westbrook lowered the preferred return hurdle from 10 percent to 6 percent.
Westbrook’s prior real estate vehicle, Fund VIII, closed on $2.3 billion in equity in May 2008. Investors in Fund VIII include the Arizona State Retirement System, the New Jersey Division of Investment, the New York State Common Retirement Fund, the Pennsylvania State Employees' Retirement System, the State of Wisconsin Investment Board and TRS, according to data from PERE Connect.