REAL ESTATE - UBS Global Asset Management and the Alder Group have formed a joint venture to invest in up to $300m(€232m) worth of assets in the southeast in the US. The debt to equity ratio for the transactions are 60%-40%.
The venture will be invested on deal-by-deal basis. No set amount has been allocated to the venture from UBS or Adler. An example of a typical deal is that for a $30m transaction there would be $12m of equity required. Around $11.1m would be supplied by UBS and $900,000 from Adler.
Matthew Adler, CIO at Adler, said: "This venture gives a direct source of capital that we can invest in the marketplace with. UBS will have an exclusive relationship with our deals. It’s our belief that this venture will be very beneficial to both companies."
UBS will be investing with Adler through a variety of sources of capital. This could include a mixture of commingled funds and separate account pension fund clients.
The joint venture will have a southeastern focus. It will be looking at the major markets in Florida, including Tampa, Orlando and Broward County in the southern part of the state. It could also look at deals in Jacksonville and Norfolk, Va.
All of the transactions will be for value-added deals. These would be buying existing properties and use a variety of strategies to turn the assets around. This would include improved operations, property upgrades, re-tenanting, expansion and re-development.
The property types to be considered are office, industrial and retail. As there are no assets in the venture up to now, the first round of prospects are being considered. Deal size for the venture is from $15m to $75m.
The return requirements for the venture are a 13% to 16% leveraged IRR. This would be 13% for a straight acquisition and 16% for a development or re-development. These yields are based on a wide range of holding periods. It could be anywhere from two to 10 years.
Adler does have a track record investing along with other institutional players. These include companies like MetLife, Apollo Real Estate Advisors and GMAC.
The group has not been actively investing in the market for the past two years. as the volume of capital in the market was resulting in the compression of cap rates. "We think that there will be less capital in the marketplace this year making it a better investment environment."