(PrivateEquityCentral.net) San Francisco and New York-based real estate secondary fund Liquid Realty Partners announced today it has fully invested its first fund of approximately $12m.
The fund acquired real estate private equity fund interests worth $30m, including co-investment capital, according to Mark Berman, a co-managing partner at Liquid Realty Partners, said.
The firm, which was founded in early 2002, has acquired interests in five real estate-focused private equity funds. The fund had one lead institutional investor.
Berman said that the same types of institutions looking for liquidity from their real estate fund interests mirror those looking to exit their buyout fund investments, such as banks, insurance companies, and pension funds. He added that his opportunity is a burgeoning one.
“There is now about $100bn – up from zero in 1990 – in primary commitments to real estate funds,” Berman said. “We think that about three to five per cent of the primary commitments are up for sale in the secondary market.”
The firm conducts a strict bottom-up due diligence process on the underlying assets it is buying. Being a secondary fund, Berman added, provides a natural diversification across asset types, asset location, and fund vintage year.
“Selling real estate fund interests can be a quicker, easier and more discreet way for institutional investors to manage their real estate equity portfolios,” Scott Landress, co-managing director of Liquid Realty Partners, said in a statement. “With liquidity needs rising, and real estate performance lagging expectations, we are experiencing strong demand for our capital.”
The European market for secondary real estate is a small, but growing, part of the European sector. European real estate is traded less actively than in the US and holding periods are longer, but many funds believe there is a chance to broaden their investor base as opportunistic real estate investment is becoming more institutionalised in Europe.
Berman co-founded Liquid Realty after running Trinad Partners, a private equity firm he founded in 1994. Prior to that, he was mergers and acquisitions attorney with Skadden, Arps. Landress was formerly the global managing director of real estate investment banking at Bank of America, and held senior real estate investment positions at Merrill Lynch, PaineWebber and Kidder Peabody. Byron Sheets serves a strategic advisor to the firm. Sheets is also a partner at Paul Capital Partners, a secondary firm with approximately $2bn under management.