Term Sheet: REC USA unveils DE&I survey; Ex-Blackstone vet Pike launches debt and equity venture; Oaktree and Franklin BSP fundraise for fresh debt strategies

Real Estate Capital USA publishes a first-of-its-kind DE&I survey in its latest magazine; Ex-Blackstone veteran Chad Pike launches Makarora to target private debt, equity and public real estate market opportunities; Oaktree and Franklin Benefit Street Partners look ahead to 2024 for debt fundraising efforts; and more in today’s Term Sheet, exclusively for our valued subscribers. 

They said it

“Will we do an office building? Yes, if the credit quality is fantastic, if we believe it’s mission critical and we believe that people need to be in the asset” 

Marc Zahr, head of Blue Owl Capital’s real estate business, sharing his perspective on the out-of-favor sector in an interview with affiliate title PERE

REC USA: Sector split on DE&I

The latest edition of Real Estate Capital USA is available online and in print and features the inaugural DE&I State of the Market Survey conducted in collaboration with the New York-based trade body Commercial Real Estate Finance Council. Respondents showed split views on how industry-wide DE&I initiatives are faring and the ways in which the landscape could improve. The magazine also includes an exclusive Q&A with CREFC executive director Lisa Pendergast and a founders’ roundtable featuring senior executives at Avrio Management, Basis Investment Group, BGO, MSquared and Waterfall Asset Management.

What’s new

Chad Pike is launching Makarora to target private debt, equity and public real estate opportunities (Source: Makarora)

Operation Makarora

More than three years after retiring from New York-based real estate monolith Blackstone, Chad Pike, once one of the heavyweight manager’s leading real estate investment professionals, is back with his own firm. As affiliate title PERE revealed this week, Pike formed Makarora with the intention of capitalizing on the current dislocation in the sector. Early recruits include Adam Brooks, who has filled senior roles at manager and advisory Prospect Ridge and manager AllianceBernstein, as head of debt.

An initial vehicle is expected in 2024 that could attract multiple billions of dollars from investors. According to a launch document obtained by PERE, those investors can expect a flexible investment approach by the firm – in line with Blackstone’s tactical opportunities business, the last platform Pike worked on before retiring from the mega-manager – but the vehicle will most likely kick off with credit investments given the debt-starved condition of the market today. For more on Pike’s comeback and the launch of Makarora, click here.

Grade A recapitalization

Toronto-based manager Manulife Investment Management this week closed a $1.2 billion venture with New York-based advisory StepStone Real Estate and Indianapolis-based real estate developer and investment company Scannell Properties to recapitalize a 35-asset portfolio of Class A industrial assets. The portfolio spans 10.4 million square feet across 17 US regional markets, Manulife noted in a December 5 statement. Jessica Harrison, head of US acquisitions and capital markets, real estate, at Manulife, said fundamentals – including revenue, rent growth and occupancy rates – within the industrial sector have remained strong through recent volatility.

“We see this investment as an important opportunity to capitalize on the current market environment and access a portfolio of assets well-positioned to capture the robust long-term demand for logistics, especially as companies revisit supply-chain needs and advancement in automation,” she said.

Manulife and Scannell plan to use the funds to complete the construction and lease-up of its remaining vacant space and execute financing and disposition strategies upon stabilization.

Potent pairing

Montreal-based Otera Capital this week originated a $300 million loan for New York-based manager Tishman Speyer that will fund the construction of a multifamily and retail development at 55 Hudson Street in Jersey City, New Jersey. The planned two-tower development will be located on the waterfront, with construction set to begin this month and finish in early 2027. The project is expected to deliver around 2,000 apartments, street-level retail and a public plaza.

There is a broader trend materializing in the city’s multifamily sector, where more lenders and investors are allocating capital. Other recent financings include Slate Property Group’s move in July to fund two short-term multifamily development loans totaling more than $200 million. Otera’s financing marks its second mega-loan to Tishman Speyer this year. Previously in June, the lender took the lead on a $750 million construction loan for a research campus at Harvard University.

Trending

Fundraising the debt

A lack of bank lenders in the present commercial real estate debt market has brought about more fund launches from alternative lenders to fill the financing void. This week, Los Angeles-based manager Oaktree Capital Management added to that momentum with the launch of its next real estate credit fund, Oaktree Real Estate Credit Income Fund, according to Form D filings. In May, the firm rolled out the fourth iteration of its standard real estate debt fund with a $3 billion target, according to data from affiliate title PERE. The firm did not state a size for its fourth vehicle.

Oaktree’s launch arrived the same week news emerged New York-based manager and Franklin Templeton affiliate Benefit Street Partners was also aiming to raise the next addition to its real estate debt fund suite with a $1.5 billion target size. Real Estate Capital USA confirmed BSP’s fundraising efforts with sources familiar with the matter. In July, BSP launched its second opportunistic real estate debt fund.

Increasing shortage

Future demand for low-carbon offices across global markets far outstrips supply as the largest corporate tenants are demonstrating a greater commitment to sustainability, according to a report published this week from Chicago-based advisory JLL. The report found the existing supply of sustainable offices is about 75 percent of what tenants will require and reported an average rental premium of 7.1 percent for green-certified, Class A offices.

Building owners and investors can still benefit from an early-mover advantage by developing or redeveloping properties that comply with more stringent environmental standards – or face headwinds for non-compliant properties in markets where lower-carbon offices comprise a higher percentage of the market’s stock, the report said. The bottom line is that brown-to-green conversions are expected to make up a greater portion of lending and investment portfolios in the future.

Data snapshot

Paying for the risk

The percentage of insurance costs as part of the income receivable in the US more than doubled from 1 percent to 2.3 percent over the past five years, according to research from MSCI. The growing number and severity of extreme weather events and higher reinsurance rates means some regions are facing higher costs due to their exposure to these risk factors. Florida and California recorded the highest percentage of insurance costs, standing at 4.4 percent and 3.6 percent respectively.

People

A boss for Ontario’s retooled real estate group

The Toronto-based institutional investor Ontario Teachers’ Pension Plan this week outlined forthcoming leadership and real estate group changes to take effect in 2024. The C$247 billion ($182 billion) pension fund has appointed Pierre Cherki as executive managing director, real estate, effective January 22, 2024. The newly created leadership position will oversee Ontario Teachers’ in-house real estate asset group, to be established January 1, 2024. Cherki’s appointment and the group carve-out follow the pension’s June 2023 move to bring Cadillac Fairview’s international investment professionals in-house. The pension noted in a December 5 statement that the new-look business remains a core part of the pension’s global real estate portfolio.

Brokerage rolls out capital market division

Charleston, South Carolina-based brokerage Sands Investment Group this week hired Miguel Jauregui to launch a capital markets division. The group will assist commercial real estate investors with a wide range of services, including advising on debt and equity and structuring deals. Jauregui will work out of the firm’s Los Angeles office and has held senior positions at broker SAB Capital and banks Wells Fargo.

Loan in focus

Madison Realty Capital helped refinance a Boston condo project. (Source: Madison Realty Capital)

Doubling down in Beantown

New York-based Madison Realty Capital and Los Angeles-based Cottonwood Group have originated their second major construction loan in the past month, funding a $241 million financing package for a planned condominium development in Boston. Local firm Cronin Development will use the financing for the construction of the St Regis Residences, Boston. While Cottonwood originated a $63.25 million B note, Madison Realty Capital funded the A portion of the financing. Last month, the partners funded a $180 million construction loan with a similar split for a New York residential tower. For Alexander Shing, chief executive of Cottonwood, the transactions demonstrate the firm’s ability and capacity to navigate capital stacks in complex transactions.


Today’s Term Sheet was prepared by Randy Plavajka with Samantha Rowan and Shihao Feng contributing