PE mega funds with real estate focused fund

rrefinn's picture
Rank: Monkey | banana points 65

Which megafunds have real estate groups?

What are some of the best real estate focused groups among these megafunds?

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Comments (26)

Feb 3, 2019

Literally all of them. And all of them are considered highly respectable places to work. It would just be a matter of your fit with the team

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Feb 5, 2019

how would the environment of a purely real estate focused PE fund differ from a mega funds RE environment?

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Feb 3, 2019

BREDS comes to mind. BX real estate debt strategies

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Feb 4, 2019

Lol, what made you pick just this one BX RE fund to highlight? OP is thinking something more like Carlyle or KKR where RE isn't their mainstay.

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Feb 4, 2019
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Feb 4, 2019

Hijacking this thread with a side question:

Let's take a group like KKR. KKR parters with GP/Sponsors on a deal by deal basis signing $25mm-$50mm equity checks per deal (just guessing).

What is it called when a group like KKR invests $200mm in an LP fund that partners with GP/Sponsors on a deal by deal basis? Is that called a secondaries fund?

Feb 4, 2019

This would be a primary commitment.

A secondaries fund raises capital with the strategy of buying lp interests on the secondary market (Blackstone has a business unit that does this called Strategic Partners).

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Feb 4, 2019

So then how would you classify those groups vs the groups that invest deal by deals:

Example: Megafund X

  • Group A: Invests large sums of money into LPs, who then invest that money into deals
  • Group B: directs smaller sums of money into actual deals with GP/Sponsors

Both are "Real Estate groups", right?

Feb 4, 2019

I'm not familiar with any mega funds that invest as LPs into LP Funds that then invest with GP/Sponsors. Typically, its the megafund that invests with the GP/Sponsor.

Feb 4, 2019

I work for a PERE firm. We do direct investments with GP/Sponsors. On of our investors is JP Morgan.

The weird thing is, we also compete with JP Morgan's RE Fund that invests with GP/Sponsors. So these big firms do have "both" types of groups, I'm just wondering if there is a way to classify them.

Feb 4, 2019

Sure, they're both investing in real estate. One is just investing on a direct JV equity basis (Group B), and one on an indirect / primary basis (Group A).

Example of how this generally works:

Random Pension Fund / Sovereign Wealth Fund / HNW / Fund of Funds (Group A) makes an LP investment (also referred to as a commitment) into Oaktree / Blackstone / KKR's real estate focused fund (Group B). These groups then invest directly in deals with real estate operators / sponsors. Note that in this instance, the Oaktree / Blackstone / KKR type group is the GP of their real estate focused fund.

Feb 4, 2019

I understand how it works, I am just wondering how you would name or classify the two groups.

For example, a group like JP Morgan does LP equity investments deal by deal with sponsors. But JP Morgan also makes big investments in PERE focuses LP equity firms. Two distinct groups, both investing in real estate, but in different ways. I would imagine each group requires different skill sets and experience.

Feb 5, 2019

Group A is true Real Estate Private Equity in my mind, this is a firm investing in a company that invest in real estate.

Group B would be a fund that invest in Real Estate or a Real Estate Fund.

The difference is one has mortgages and property, the other has an equity share in a company that invest in real estate. This isn't a hard science this is more of how I would classify them.

Now when it comes to naming the team or if you want to be able to google a team and see which one they are, I have seen a few key words stick out. One example is a "Special Situations" RE fund is a term that would typically put the RE fund into group A for example.

Feb 4, 2019

So do you consider Pension Fund, Sovereign Wealth Funds, HNW individuals to be Real Estate Private Equity Funds? I would consider them to be "Group A", which is not REPE IMO. Firms like Blackstone, Oaktree, KKR are REPE funds IMO.

Feb 5, 2019

You raise a fair point. I think that this is something that would be an interesting topic to hear more points of view on.

I know that some of the above funds have both strategies. It is probably a product of the fact that when you raise billions in a close ended fund you can't possibly deploy and return capital in 5 years only investing properties with a different GP on each deal at same time does a HNW individual have the time and resources to source partners/properties/deals. So instead they invest in an LP.

Some deals even the line gets blurry. Was BX buying out Hilton a purchase of the brand, management and senior team that also came along with the hotel properties (a true Private Equity Deal)or was it a purchase of the properties and they then expanded the brand and management team (A RE deal with PE aspects) or was it a true covered land play (A true RE deal). On top of that BX has the resources to really nail down the right decisions and execute on all aspects of that type of deal.

I think as real estate becomes more and more institutionalized that these lines will become more clear, but as of now even when someone says they work in REPE there could be a wide range of what they are working on.

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Feb 4, 2019

all of the buyout megafunds have a real estate group except for warburg pincus

Feb 5, 2019

Warburg does, but only in China I believe

Feb 4, 2019

yup, that's correct, was speaking only within the context of the US

Feb 4, 2019

Blackstone, KKR, TPG, Apollo, Carlyle, Oaktree, Bain Capital, Ares, Cerberus, Lone Star and all the big Canadian pension funds / sovereign wealth funds.

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Brill: I blew up the building.
Robert Clayton Dean: Why?
Brill: Because you made a phone call.

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Feb 5, 2019

any of these groups considered stronger than others?

Feb 5, 2019
  • BX all over the place in RE and across the different verticals of BREP, BREDS, BTO etc,...
  • Apollo, Lone Star and Cerberus (talking Europe here) mainly focus on NPL secured by RE, instead of doing direct buyouts.
  • Bain is big in NPLs and just recently built a dedicated REPE team.
  • Carlyle struggled a lot and reshuffled their RE team a couple of years ago.
  • At least in Europe KKR does a lot of JVs and some interesting development stuff.
Feb 14, 2019

I don't think Providence has a RE team..?

Feb 4, 2019

Wait good catch. I was referring to Benefit Street Partners (RE Debt), but it looks like they got acquired Franklin Templeton in October 2018.

Robert Clayton Dean: What is happening?
Brill: I blew up the building.
Robert Clayton Dean: Why?
Brill: Because you made a phone call.

Feb 5, 2019

Ares

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Feb 7, 2019
Feb 14, 2019