CarVal Investors, the investment management arm of US agricultural powerhouse Cargill, is to shutter its real estate equity fundraising business but retain its focus on real estate debt investment, Real Estate Capital’s sister title PERE has revealed.
The Minneapolis-based investment manager confirmed it will no longer be raising capital for either its US or European fund management operations. Instead, it will continue to engage with the asset class via investments in real estate debt, specifically in loan portfolios and structured credit strategies.
“We have decided not to continue to raise real estate funds,” said Jody Gunderson, CarVal’s managing principal, who also leads its investment strategy, “in order to focus on our credit strategies, including our commercial real estate credit strategies.”
At present, it has approximately $10 billion in assets under management across asset classes, including real estate, although the lion’s share lies in debt strategies. The firm also invests in corporate loan portfolios, securities and special opportunities.
A spin-out of the real estate fundraising business, which is yet to be officially announced by CarVal, will see four of its current real estate team, Robert Balick, head of European real estate; Frederic Laurent, head of France real estate, Eric Salmon, who works alongside Laurent in the Paris office; and Serge Maton, head of UK real estate, all leave the firm to set up a new business, which will be led by Balick.
In the near-term, the quartet will become senior advisors to ensure CarVal’s existing fund in Europe is wound down in an orderly manner. The firm held a final closing for its CVI Europe Real Estate Partners fund on €350 million in 2015 and the capital was invested in offices, retail, industrial and residential assets in France and the UK via an opportunistic strategy.
CarVal’s North American-focused vehicles, CVI Real Estate Value Fund III and CVI Real Estate Value Fund IV, were launched in 2011 and 2013 respectively. The firm collected $205 million apiece from investors for these vehicles, which carry a value-add strategy and also have been deployed across property types.
“We are going to continue to work with Robert and his team and they will continue to manage our exiting real estate investments in the UK and France. The difference is that they will become senior advisors to CarVal. We are excited about the opportunity to deliver strong returns on those existing assets,” Gunderson said.
“The only change of significance is that we are not going to be raising additional funds. Robert and his team will also have the opportunity to, away from CarVal, start their own business,” Gunderson added. “It is a collaborative ‘win-win’ solution for both CarVal and Robert and his team.”
Balick, who joined CarVal in 1997, became head of European real estate in 2010, said the new business would continue a similar investment strategy to that of CarVal. “This gives us the opportunity to continue what we have been doing for the last 20 years, which is opportunistic equity real estate investments,” he said. “The type of transactions we have been doing in the past, and that we are planning to do in the future, are investments in real estate portfolios where we buy in bulk and sell unit by unit. We are also going to be doing large single-asset restructurings of existing buildings in order to reposition and sell them to institutional investors.”
The name of the spin-out business has not been publicised yet, though a firm has been recently registered on the UK’s Companies House website, under Balick’s name: Pilot Peak Capital. CarVal declined to confirm whether the name was correct.
The firm currently manages four investment vehicles: one globally-focused fund, two North American-focused funds and one Europe-focused fund. The majority of its AUM resides in its 2007 CVI Global Value Fund, which has been invested across the firm’s target asset classes.
CarVal Investors was founded in 1987 by its parent company, Minnesota-based Cargill, which was itself founded in 1865. Cargill, a €107 billion agricultural powerhouse, employs more than 150,000 employees in 70 countries and is the largest privately-owned company in the US, ahead of behemoths such as Koch Industries, State Farm Mutual and Dell.