UNITED STATES - Savanna Investment Management has joined the institutional fund management business with the closing of its Savanna Real Estate Fund I.

The company raised $313m (€216m) for the fund, including a $75m contribution from the  California Public Employees Retirement System (CalPERS), and had a variety of other investors in the fund such as two other pension funds, two banks, two insurance companies, two endowments and one foundation.

Savanna has previous experience of working with institutional capital, according to Nick Bienstock, managing partner for the commingled fund, but has never created a specific fund until now.

"We do have a history of investing with real estate invested by institutions. One example of this would be Lubert Adler. But the commingled fund would be our first dedicated investment fund we have built on our own."

Savanna made a co-investment to the fund equivalent to 2% of the total capital raised and it is projected investors will achieve net IRR returns of around 17%.

The value-added fund will eventually have total capitalization of $1bn thanks to leverage in the range of 65-75%, so deals can then be done in the office, residential, industrial, retail, land and development arenas.

Savanna will focus its attention in the real estate space between Boston, Washington DC and Atlanta, given this is the part of the country it knows best since the company was formed in 1992.

There are currently two assets held in the fund, one of which is a $100m redevelopment project across from Madison Square Garden in Manhattan. This will include the development of 90 residential units and 18,000 s.f. (1.67225m2) of retail space while the retail component could include a place for a bank and pharmacy.

Savanna is now out in the market seeking construction financing to cover the 65-70% of the project but the second project is to turn 282 acres of land it owns near the Stewart International Airport in Newburgh, New York into around one million square feet of real estate which includes some industrial and hotel projects.

Most of the deals for the commingled fund will be direct acquisitions but there will be some selective joint-venture equity and mezzanine debt investments made with third party companies.

Topics