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Monday, 15 July 2019

Family Office Affiliate Raising Third Fund, Targets Up to $600Mln of Fla. Real Estate

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Commercial Real Estate Direct Staff Report

Halstatt Real Estate Partners, an affiliate of a Naples, Fla., family office, is close to reaching its target of $150 million of equity commitments for its third fund, which is investing in properties and developments throughout Florida.

The company has raised $132 million through the fund, Halstatt Real Estate Partners Fund III, which already has deployed $65 million of equity in five investments. It expects to make another eight to 10 investments. With debt and co-investment capital, the fund plans to acquire $500 million to $600 million of assets.

Halstatt was formed in the mid-1990s as the investment arm of the Sproul family, which was involved in the development of southwest Florida in the early 1900s. Besides real estate, it also acquires and operates companies and serves as an investment manager.

The company launched its first real estate fund in 2010 and raised $100 million of equity, which it leveraged to make $323 million of investments. The fund acquired 11 apartment, residential condominium, office and retail properties. All of those assets since have been sold, generating an internal rate of return of 21.6 percent for its investors.

It raised $120 million for its second fund, which launched in 2013, and leveraged it to make $410 million of investments. Of the 13 apartment, office and retail properties it acquired, the investment vehicle sold four of them, generating an IRR of 20.3 percent.

Halstatt raises equity from endowments, foundations, pension funds and high net-worth individuals. It also typically forms ventures with companies, which provide a minority equity stake and manage and operate the properties.

The previous Halstatt funds, each of which targeted only Florida assets, had four-year investment periods and eight-year term. The third fund, however, has a five-year investment period and nine-year life. Bobby Sullivan, principal of Halstatt Real Estate Partners, explained that the latest vehicle has a longer life because it is late in the real estate cycle and the company wanted to be more selective in its investments.

"The investment thesis for fund three has more of a defensive approach," Sullivan said. "We're looking for investment opportunities that are less sensitive to any volatility in the Florida economy. We're targeting investments that are less susceptible to macroeconomic drivers."

The third fund's initial investment came in late 2017, when it invested $29.9 million for the development of the 644-bed UnionWest at Creative Village student-housing project in Orlando, Fla. The downtown property, at 601 West Livingston St., is opening next month on a campus that's shared by the University of Central Florida and Valencia College. The 15-story building also will have 105,000 square feet of academic and education support space, 11,000 sf of ground-floor retail space and a parking garage.

UnionWest is Halstatt's first student-housing property, but it expects to close on another development on a college campus soon. It may also invest in a second phase of the UnionWest project.

"We've pivoted to this student-housing investment class because it's a little more defensive in nature," Sullivan said. "There's a conveyor belt of demand for these types of assets regardless of what's happening in the economy."

The third fund also is targeting apartment properties that cater to tenants who rent by necessity, as opposed to by choice. It paid $30 million, or $131,579/unit, for the 228-unit Lakeside Central apartments at 529 South Parsons Ave. in the Tampa, Fla., suburb of Brandon, Fla.

And it bought a portfolio of three apartment properties with 538 units in a venture with GoldOller Real Estate Investments of Philadelphia. The portfolio consists of the 323-unit Aqua at Windmeadows, at 3700 Windmeadows Blvd. in Gainesville, Fla.; the 119-unit Oasis, at 1250 Woodcrest Drive in Daytona Beach, Fla.; and the 96-unit Boulevard, at 1757 South Clyde Morris Blvd., also in Daytona Beach.

Halstatt plans on renovating each of the properties, which were built between 1977 and 1986. It expects to increase monthly rents, but the prices will remain much lower than properties built in the past few years.

"With some capital improvements and some updating, we can offer a great product to a large swath of the rental community," Sullivan said.

In addition, the fund is pursuing office properties that are near downtown areas as well as those that it can acquire for less than their replacement cost. To that end, it has ventured with Cardinal Point Management of Tampa to purchase a pair of office buildings in Fort Lauderdale. The venture paid $47.5 million, or $83/sf, for the 571,332-sf Coastal Tower, at 2400 East Commerce Blvd., and it paid $41.68 million, or $78/sf, for the Trade Centre South at 100 West Cypress Creek Road.

New York Life Insurance Co. provided the venture with a $41.04 million loan to help fund the Coastal Tower acquisition and a $34.35 million mortgage for the Trade Centre South purchase.

Comments? E-mail Tim Casey or call him at (267) 397-3347.



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Additional Info

  • Syndicate to Realpoint: No
  • States: Florida
  • Subject: Institutional Investment (INS), Opportunity Funds (OPPY), Property Acquisitions (ACQ)
  • Valuation: More than $150 million
  • Private: No
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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