UNITED STATES - Heitman has attracted pension fund institutional investors to the tune of $800m ($599.6m euros) for its commingled fund known as Heitman Value Partners II - double the size of its original $400m Heitman Value Partners offering.
One of the key changes driving demand this time and contributing to such strong interest is the latest fund will make investments in Mexico, said Maury Tognarelli, chief executive officer of Heitman.
"It made sense for us to add this to the second fund. It’s a logical extension of investing in Canada and the US as there is a lot of cross-border activity from a tenant perspective," said Tognarelli.
Heitman raised funds from several US investors including a $200m commitment from the California State Teachers Retirement System while the Wisconsin State Investment Board allocated $70m to the fund and the Los Angeles Fire & Police Pension System made a $30m commitment to the fund.
Some of the investors in the commingled fund will also have the option of committing additional capital to co-invest on specific transactions with the fund while Heitman is planning on putting 65% leverage on the commingled fund to give it a total capitalization of around $2.3bn.
Investors in the commingled fund are projected to achieve a net IRR in the range of 12-14%, assuming a holding period running from three to seven years but the real estate manager is already off to a rousing start as it has already committed around 41% of the capital from the commingled fund to transactions such as senior housing, data centres, condominium hotels and office buildings.
This is to startup operation of joint ventures with companies focused on a single property type. An example of this is that Value Partners II has done a transaction with Sunrise Senior Living Investments for senior housing.
Heitman Value Partners II is expected to consider a variety of property types – worth $40m to $60m - including office, industrial, retail and apartments as well as specialist properties such as student housing and hotels.