CentreSquare Investment Management, is seeking to launch a $500m value-added real estate strategy six years after closing its previous fund.
The real estate arm of BNY Mellon, formerly known as Urdang, is marketing the CentreSquare Value-Added Fund III six years after the final closing of Fund II, which raised $463m in capital commitments.
The investment period of Fund II lasted from 2006 to 2011, its activity interrupted by the global financial crisis. The first closing for CenterSquare’s latest fund is expected to take place during the second quarter of 2014, with the final closing scheduled for 2015.
CentreSquare has argued that a value-added strategy in the US will offer better value than traditional core investments.
PJ Yeatman, head of private real estate at CenterSquare, said: “We believe that a middle market, value-add real estate strategy represents the most attractive space in the market for creating value and reducing risk.”
In a recent paper entitled ‘Era of Execution’, Yeatman and senior vice-president Jeffrey Reder argued that “stabilised core assets carry greater risk than is currently perceived”. The paper attributed this to “the combination of a high cost basis and a lack of opportunity for increased yield”.
It continued: “In contrast, transitional value-add assets can be acquired at an attractive cost basis in today’s market because they are perceived to carry greater risk. In reality, the competitive cost advantage created through redevelopment of these assets provides superior downside protection and less actual risk.”
CentreSquare’s new fund would focus on a number of sectors in the US, including office, multi-family, retail, industrial, hospitality and parking facilities.