There is nothing abnormal when a private equity player decides to target commercial real estate with a new fund. In this case, the PE firm is also a developer.
Al. Neyer, a 125-year-old commercial real estate development and design-build firm with offices in Cincinnati, Ohio; Pittsburgh, Pennsylvania; Raleigh, NC and Franklin, TN, just closed their first real estate investment fund.
The company, with $ 808.8 in construction signatures since 2018 and 22 projects in 2020 alone, has raised $ 110 million from 105 investors. It plans to fund $ 300 million in Class A industrial projects. Neyer plans to use debt with equity, according to a report by Cincinnati Business Courier.
âSo far, Al. Neyer has been raising equity on a project-by-project basis,â the company told GlobeSt.com. âOver the past few years, the company has experienced explosive growth, becoming 100% employee-owned in 2014 and expanding to Nashville in 2015 and Raleigh in 2019.â
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The company has a pipeline of 20 projects that could represent up to 12 million square feet of industrial space, given the demand for e-commerce and manufacturing. Neyer expects to “deploy all equity within 12-18 months and plans to launch additional funds once all equity is deployed.”
Neyer is not the only real estate with a booming private equity arm. Boundary Cos., A Bethesda, Maryland-based company founded in 2014, announced that it has closed its first investment fund, last month. Although Boundary did not disclose the amount of the fund, he said he expected to undertake investments of $ 300 million.
Private equity has long been a source of capital for developers, designers and builders. While companies raising their own funds are not âuncommon,â Peter C. Lewis, president of Wharton Equity Partners, told GlobeSt.com, âyou are seeing a little more traction. “
One of the reasons is the financial interest of real estate companies and investors. Without private equity intermediaries, the company obtains more profits and the limited partners have less dilution of the investment.
Projects like those of Neyer and Boundary are likely to be attractive due to their focused nature. âInvestments should also be very focused on areas that are likely to outperform,â Paul Getty, CEO of First Guardian Group, told GlobeSt.com. âBoth of these funds are targeting very hot areas – distribution centers and last mile storage, which can also be a type of distribution center for small retailers and mom and pop entrepreneurs.â
“Many companies that [property management, construction management, development] say, “If we can do all of this, why can’t we participate in the fund game as well?” “Marc Feigelson, co-head of the Real Estate and Construction Industry Practices Advisory Group at the accounting and consulting firm Kaufman Rossin, told GlobeStreet. .com.
âReal estate operators are getting smarter and smarter,â says Lewis. “They come to the conclusion that it is better to do it internally.”