In your experience, whats the minimum deal size that PE Funds begin to deploy capital in RE acquisitions? Would you agree anything under $50M is too small and a playing field they bypass all together? I know the Blackstones & Brookfields of the world focus above $100M, what about the smaller PE funds?
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Really depends on the size (AUM) of the PE shop. I'm dealing with one small family office looking at a $30MM project.
There are tons of REPE shops that kill it by aggregating ~$250-500mm portfolios of $10-$50mm properties and selling them on a portfolio level. Hell, the second REPE shop I worked at would buy under $5mm if the returns were there. And by and large, it's a lot easier to find quick value-add returns by buying up sub-institutional product at a good basis, versus executing a full on re-positioning of a fully-marketed, $100mm deal. Especially in current times, there's so much institutional money chasing the same deals that the sub $50mm range is a lot easier to find value-add plays. Federal Capital Partners is a great shop here in DC, that lists their target investment range as $3mm-$50mm for certain strategies.
If you're talking about diversified, household name PE funds in the likes of Carlyle, Blackstone and Ares, then probably those guys aren't interested in much below $50mm.
Thanks for the thorough answer @REPE God" , I'm glad you touched on value-add plays. I was specifically asking because I'm interested in the competition for value add deals $10M and below.
One of our funds is worth over $1BN, and we regularly buy $10M-$20M properties. Hell, we have an absolute piece of shit cold storage property in the fund that cost less than $500k but the CoC is like 25% because our basis is so far below replacement cost.
Love it.
A lot of the brand name PE funds have a minimum “equity check” size. I’ve noticed $30 mil (implying a $100mil asset at 70% LTV) seems to be the minimum for a lot of your standard Wall Street funds that buy individual assets.
Some firms that have a minimum might go lower if the deal is with a prior relationship or if it’s the start of a longer term relationship (eg teaming up to buy $300 mil of industrial in the NE over the next 18 months).
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