UNITED STATES - Rockwood Capital has closed the money raising on its Rockwood Capital Real Estate Partners Fund VIII just shy of its target, at $964m (€720.6m).
This is seen as a good result for the company, especially given current market conditions, as it first started talking to investors at the end of 2007 about committing capital and the original goal was to reach $1bn in assets for the commingled fund.
Many US real estate managers are having a hard time raising new capital as most pension funds are already above their targeted allocations, and therefore cannot invest new capital to commingled funds. In some cases, managers have been forced to accept a lower target fund level or take their commingled funds off the market.
Investors in Fund VIII include Maryland State Retirement System, which has invested $100m, while New York State Teachers Retirement System is in for $50m and Illinois Municipal Retirement Fund has invested $40m, while it did also attract some foreign capital from Swiss pension funds, according to Sharon Ann Miller, managing director with Rockwood Capital.
"This is a logical extension for our company. We have received interest from public and corporate pension funds, foundations, endowments, insurance companies and high-net-worth individuals. It would make sense for us to attract some capital outside of the United States," added Miller.
Investors are projected to see a 15% net IRR, and the fund has a nine-year life with the option of two one-year extensions.
There are no assets in the fund at this time, but consultants have said this is the best time for pension funds to invest in blind pools rather than pre-specified assets, at least while the values of existing assets continue to drop: a view Miller shares.
"I do think it's better to invest the capital in the future than to have already placed some capital in assets that are going down in value," she said. "We would like to be able to close on a couple of purchases by the end of the year."
The fund will be used to buy existing US hotel, office, retail assets and apartments in need of improvement as well as to buy equity in new development projects, in supply-constrained areas such as Boston, New York City, Metro Washington DC, Los Angeles, the San Francisco Bay Area and southern Florida.