How to raise a billion dollars in a challenging environment
Two senior executives recently left big investment management shops to start a new real estate fund platform.
And, despite a broader collapse in the number of funds and the amount of capital raised, Town Lane (the new platform) raised $1.25 billion in the last nine months.
Here are seven "lessons learned" for outsiders looking in, who dream of launching a real estate fund...
1. Have street credit
Town Lane may be new but its founders (a brother/sister team) have deep institutional experience. Tyler Henritze deployed $90 billion as head/co-head of acquisitions for Blackstone. Parker Morse grew Sycamore Partners from $0 to $10 billion in AUM.
2. Hire rock stars
The Town Lane resumes read like a Wall Street who's who. Blackstone, Morgan Stanley, Goldman Sachs, Starwood, Ares, Evercore, UTIMCO, and ACORE with academic backgrounds from Yale, Wharton, Cornell, NYU, Georgetown, Brown, etc. Pretty impressive for an 11-person team.
3. Be hands on
No investor relations team, no placement agents, no problem. Town Lane's raise was reportedly handled by the firm's founders.
4. Avoid baggage
Not having any legacy assets allowed Town Lane to focus on their thesis for the future, which was almost certainly a major differentiator.
5. Stay flexible
No themes. No exclusive property types. Just relationships and finding opportunities for flexible capital to solve problems.
6. Get an early win
The number of CRE funds raised was down 65% last year, but Town Lane kicked off its raise with a $700 million initial close. The firm quickly upped its $1 billion target to $1.25 billion, which it accomplished.
7. Lawyer up
It doesn't hurt to have the biggest law firm in the world representing your fund. Town Lane hired Kirkland & Ellis.
PS - This fits with one of our 2024 predictions. Think we'll see more spinouts? Town Lane's fundraising accomplishment seems hard to top.
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