So you want to start a real estate fund?
Read this first.
Sponsor:
Long Wharf Capital, a Boston-based real estate investment manager, is in the final days of fundraising for its 7th value-add real estate fund, targeting $500M.
Targeted returns:
12% to 15% net IRRs
Investments:
25-35 value-add properties over the next 3 years
Focused on industrial and multifamily (60-70%)
Fee structure:
1.5% + 20% over 9%
Fundraising:
$323M in closed commitments
$478M in pipeline (including closed)
Final close expected by YE 2024.
Track record:
6 prior funds with mixed results
$250M to $875M in equity for each fund
3 funds before the Global Financial Crisis (GFC)
Most funds have delivered net IRRs in the 6%-18% range
GFC fund underperformed (-8% IRR)
Most recent fund is on track for top quartile performance (14% IRR)
About Long Wharf:
$2B AUM
$900M equity
24 team members (including 2 owners)
Long Wharf's history:
The platform was started by Fidelity in the early 2000s.
Fidelity spun out the platform after the GFC.
Two of the four founders have since left to join Digital Realty.
One remaining founder owns 68% of the firm and the other owns 32%.
---- 3 Takeaways ----
1. Stars must align to launch a platform
Long Wharf started as a small platform within Fidelity, one of the largest traditional investment managers in the world. Fidelity spun out the platform in 2011 and invested $20M in its first solo fund. How many managers have experience managing 2 funds with above-average results and $20M of seed capital?
2. Tough fundraising environment
Long Wharf's last fund is in the top quartile, yet this fund looks to be stuck around $500M. Fund V raised $438M in 2015, and Fund VI raised $505M in 2019. This Fund is on track to fall just short of its $500M fundraising goal.
[Note: Long Wharf had a hard cap of $650M for this fund.]
3. Good CRE roles are hyper-competitive
Most early-career professionals say they want to "get into acquisitions." Long Wharf is a good firm. Decades of experience. $2B of assets. And the entire Long Wharf team consists of only 24 people. The acquisitions team consists of 5 MDs, 1 director, and 1 associate director. The most junior person on the acquisitions team has 7 years of experience.
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