Bain closes on $1.5bn for first RE fund – Exclusive

The former HMC real estate team, now part of Bain, has exceeded its $1bn target.

Aerial photograph of the East Boston Waterfront at Sunset.

Alternative investment firm Bain Capital held a final close on $1.5 billion for its debut real estate fund, Bain Capital Real Estate Fund I, on Monday.

The vehicle launched during the second quarter of 2018 and had a fundraising target of $1 billion but no hard-cap, according to managing director and head of real estate Dan Cummings. He and the rest of the real estate team at Harvard Management Company spun out and joined Bain in February 2018 as Harvard took steps to de-emphasize its in-house investment teams and shifted to hiring external managers.

Fund I’s diversified investor base includes sovereign wealth funds, public pensions, corporate pensions, endowments and high-net-worth individuals, according to Cummings. The Los Angeles County Employees’ Retirement Association committed $100 million and the Oklahoma State Regents for Higher Education committed $7 million to the fund, according to PERE data. Bain Capital professionals, which include partners and employees, also committed capital that accounted for more than 10 percent of the total fund, making the firm one of the largest investors in the pool.

The fund follows the “value-add plus” strategy that the former HMC team had previously been executing, Cummings said, wherein assets are improved through refurbishments, re-leasing and some development. Bain will acquire assets across all property types that fit into the team’s bet on long-term secular trends. For example, investments can include lab space and senior housing, which is an investment premise made in part on aging baby boomers and their need for greater medical research and specialized housing. The team has invested in more than 3 million square feet of lab space, Cummings added.

“We’re often in niche sectors,” he said. “We’re an early and large investor [in these sectors].”

The Boston-based firm acquires assets located primarily in the US ranging in value from $10 million to $25 million, although Cummings noted that the team does have the flexibility to make some investments abroad as well. Prior to joining Bain, the team invested in China, Canada and the UK. Assets have largely been acquired one-by-one rather than through a portfolio acquisition, and of the $1.5 billion raised for Fund I, more than a third has been deployed. More than half of the deals have been off-market or lightly marketed. Bain declined to comment on investment return targets.

Since joining Bain, the 19-person former HMC real estate group has grown to 32 people. The Bain real estate team also continues to manage Harvard’s direct property portfolio, which was valued at $3.4 billion at the time of the spin-out. Cummings previously told PERE that Harvard was one of the early investors in Bain Capital Real Estate Fund I.

Law firm Fried, Frank, Harris, Shriver & Jacobson represented Bain Capital in connection with forming the fund.