GI Partners collects $1.9bn for Fund III

The private equity and real estate firm has fallen short of its target, but raised 35% more than Fund II.

US- and Western Europe-focused mid-market firm GI Partners has closed its third fund on $1.9 billion after “less than one year” of marketing, according to a statement.

The hybrid private equity and real estate fund is larger than its predecessor, which closed on $1.45 billion in August 2008, however it fell short of its reported $2.25 billion to $2.5 billion target.

Mark Tagliaferri, executive managing director, told PEO the firm is thrilled with the close given the difficult economic environment. Asked if negotiations with LPs were tougher than usual, he noted the firm has “always had a small number of large investors and, in that sense, we've always had them more or less dictating terms”.

We have always had a small number of large investors … more or less dictating terms.

Mark Tagliaferri

Fund III's returning limited partners include the California Public Employees’ Retirement System and the California State Teachers’ Retirement System. CalPERS has backed the firm since founder Rick Magnuson relinquished his role as deputy partner of Nomura’s London-based private equity arm; the US public pension contributed $500 million of the $526 million GI raised for its debut fund in 2001, with CBRE having committed the balance.

Placed by Lazard, the fund attracted commitments from many new investors including Partners Group, Capital Dynamics, the Florida Retirement System Trust Fund and the Illinois Teachers’ Retirement System.

Tagliaferri said in a statement the fundraise had grown its investor base by more than 50 percent, and noted Fund III “secured larger capital commitments from almost all of our existing limited partners”.

He attributed the continuing LP support to GI's investment thesis, which centres on acquiring “undervalued assets” in distressed industry segments.

Like all of GI's funds, Fund III will invest in real estate, as well as sectors including healthcare, retail, logistics and transportation, media and entertainment, financial services, and technology and telecoms.

Tagliaferri said GI focuses on asset-based business, and sometimes those assets are real estate. But, he said, “typically where we're buying real estate, we're building a business”, noting that the firm has in the past, for example, purchased vacant nursing homes in Europe that were later turned into part of the assets of a psychiatric care portfolio company.

GI has already committed roughly 20 percent of Fund III's capital, having made investments in companies including Care Aspirations, a UK care provider for people with learning disabilities; real estate finance firm Ladder Capital Finance; and FlatIron Crossing, a joint venture with US shopping mall operator Macerich.

Last week the firm concluded a nine-month debt restructuring process for UK leisure company Park Resorts, which resulted in the lending syndicate providing a £25 million revolving debt facility and taking a 5 percent equity stake in the company.

Last month, GI fully exited the real estate portion of its debut fund, which had invested about $280 million in 25 technology buildings. These deals generated more than $1 billion in cash proceeds, representing a 3.7x multiple and 60 percent gross internal rate of return, GI said in a statement.

The remainder of the fund's investments are expected to be exited in the next 12 months. To date Fund I has returned a total of $1.2 billion to investors, resulting in a 32 percent net internal rate of return.

GI has been expanding in order to manage a growing pool of capital and now has 35 investment professionals across its offices in Silicon Valley and London.