Grosvenor is building out its US structured development finance business with plans to expand into different regions, bring on new investors and double the size of its portfolio.
The manager first launched its structured development finance business in 2000 to help address what it saw as a shortage in supply of quality urban housing in gateway cities in the US and Canada. The platform, the fastest-growing part of the firm’s North American property business, last year secured $150 million in investment capital from two of its long-term Canadian capital partners.
With current investment capital of $300 million, Grosvenor’s plan is to grow the platform to $600 million in the next five years. To this end, the firm hired Ashleigh Simpson as senior vice-president of co-investment. Simpson will oversee $1.1 billion in value across active projects and push investments in residential for-sale and rental developments in new and existing markets.
“Our target markets all have fundamentals that we believe in,” Ashleigh Simpson, senior vice-president, told Real Estate Capital USA. “They are long-term sustainable, meaning they have a good history over and over different cycles.”
The program targets deals of $10 million and $40 million in the multifamily sector with its focus markets being Washington, DC, the San Francisco Bay Area, some southern California markets, Seattle and Vancouver. Simpson cites San Diego, Austin, Denver and Boston as some of the additional growth markets they wish to expand into.
The current environment – shaped by rising rates, geopolitical uncertainty, and inflation among other factors – is not dampening the firm’s plans.
“We are well positioned to invest in the current environment where there is a lot of the uncertainty as we believe in our disciplined approach to underwriting, investment decision-[making] and the strong fundamentals that we’re seeing in each of the markets that we’re focused on,” he said. “We’re starting to see some price adjustments across the board, because financing costs have risen.”
Simpson, who has sourced and closed 43 investments representing $8.3 billion within the public and private sectors in his career, will manage a team of eight professionals spanning Grosvenor offices in Vancouver, San Francisco,and Washington, DC. He re-joins from MetLife Investment Management, where he was vice-president of northeast acquisitions and joint ventures and managed a $9 billion portfolio
Grosvenor takes a long-term view of the markets while making shorter-duration investments.
While Grosvenor ploughs on, some players take a more wait-and-see approach.
“There are a lot of firms on the sidelines waiting for things to settle out,” Simpson said. “I would say that the majority of folks are trying to execute in this current environment, especially those that have capital and would rather have a capital deployed at some level, whether it’s sort of traditionally or they want to take something a little more high-risk or look at development opportunities, if they’re smartly underwritten.”
“The market fundamentals over time are supported,” Simpson added. “There’s good supply demand dynamics there [and we will] continue to execute in this market.”
Since 2000, the firm’s structured debt financing business has acted as a capital provider to 78 residential development projects with over 8,500 residential units. Lending more than $608 million to-date, Grosvenor’s co-investment projects represent $3.6 billion in gross development value.
Grosvenor manages a $2.8 billion portfolio of 74 high-quality properties and is executing on a $3.9 billion proprietary development pipeline across its active markets.
Consistent with the firm’s farsighted approach to ownership and development, Grosvenor values long-term partnerships: across their nine active investment partners, the average relationship is 20 years. The company is guided by ESG principles and a promise to achieve net-zero operations by 2030.