Greystar closes on first credit fund

The multi-family real estate firm's debt strategy will be initially focused on the US market.

Greystar Real Estate Partners has launched the latest initiative in the ongoing expansion of its global platform – real estate credit, Real Estate Capital’s sister title, PERE, reported.

As part of the new strategy, the Charleston, South Carolina-based multifamily real estate firm has raised its first real estate debt fund, Greystar Credit Partners I, collecting $500 million in one close from a single investor.

Greystar held the first and only close in late April, according to a filing with the US Securities and Exchange Commission, but the capital raise was not previously reported. The firm declined to name the institution, but PERE understands the sole limited partner in the fund was an existing Greystar investor.

“We have really deep and strong relationships with a lot of our institutional capital around the globe,” said Bob Faith, Greystar’s founder and chief executive. “What got this started was really an inbound request from one of our institutional capital partners who said, we’re really interested in this space, and your skills lend us a unique competitive advantage to this.”

The fund’s strategy will be focused on acquiring subordinated and securitised debt sponsored by US government-sponsored enterprises, either through an auction process, off-market negotiated transactions or the secondary market, where debt funds, sovereign wealth funds and other sellers may be seeking to offload debt securities prior to maturity. The target return and investment multiple for the fund were not disclosed.

To date, Greystar has invested approximately 10 percent of the fund’s capital. Brett Lashley, managing director at Greystar, said that the loan pools that the firm will be buying through the fund will be diversified geographically and across rental property types, including traditional multifamily, senior housing, military housing and student housing.

“That’s one advantage of the platform,” he said. “If you look across the continuum of for-rent residential accommodations, we have a healthy exposure to that and we can therefore make informed decisions around those product types.”

Additionally, given the geographic diversification of the loan books, Greystar’s on-the-ground presence as a multifamily owner and operator in 37 US states and Washington, DC would also bolster the firm’s underwriting abilities as a debt investor. “Leveraging that local knowledge to make decisions around credit is an important part of our business. It’s a way we distinguish our platform a bit, having access to robust local market data.”

Lashley, who has launched multiple new initiatives for Greystar, including opening its European office in London in 2012, will oversee Greystar Credit Partners’ activities and the firm’s real estate debt strategy. All told, five existing investment professionals at Greystar will be focused on underwriting and evaluating debt deals, as well as managing the accounting and monitoring of the fund’s assets.

Before joining Greystar in 2009, Lashley was chief operating officer at ORIX Finance, a subsidiary of ORIX USA, and previously worked at Bear Stearns in fixed income sales.
As for eventually expanding its credit strategy outside of the US, “I think we’re taking it a step at a time,” said Faith. “Our primary focus is doing a fantastic job with this first initiative.”

Greystar is the latest multifamily-focused real estate firm to launch a credit fund. In October, Berkshire Group, a Boston-based real estate investment manager, raised $1 billion for its first debt fund, Berkshire Multifamily Debt Fund, in two back-to-back closes.

The firm has been on a rapid expansion drive over the past couple of years, rolling out multiple new strategies, including its first core-plus real estate fund; its first Mexican real estate offering; the formation of a Chilean investment business and the launch of its Asia platform. The firm operates in more than 150 markets globally and is the largest operator of apartments in the US, managing over 415,000 units.