REAL ESTATE – JP Morgan Fleming Asset Management has put together a new investment fund called Excelsior II and attracted $450m of institutional capital for it.
The money came from three large public pension funds, one of which was the New York State Teachers Retirement System.
The manager believes investors will achieve gross IRRs in the 13% to 20% range. This yield assumes a five- to seven-year holding period. The closed-ended commingled fund has a 10-year life and a three-year investment period.
The investment strategy for Excelsior II calls for value-added and development opportunities across all four major property types. Around 90% of the deals will be within a 60-mile radius of New York City. The other 10% can be anywhere.
JP Morgan Fleming will arrange 50% of the transactions for the fund through Apollo Real Estate Advisors. The other half will be with other operating partners. The relationship with Apollo will give the commingled fund the first right of refusal to any transactions that Apollo is considering in New York City. This relationship lasts for the investment period of the fund.
JP Morgan Fleming feels there are going to be many value-added opportunities around the New York area. Dan Volpano, a vice president with the company and portfolio manager for Excelsior II, said: "We think that there will be some investment possibilities through the re-zoning of land that will create some ground-up developments. Apollo knows this market very well and we want to take advantage of the company’s expertise in the area."
There has been one transaction already for Excelsior II. JP Morgan Fleming made a $10m equity investment in The Classic in Stamford, Connecticut.
This is an apartment complex for rent that is being converted into a condominium. The property has a total of 144 units. The conversion is scheduled to be completed by this September.