Sculptor Real Estate has closed its largest-ever real estate opportunistic fund, Sculptor Real Estate Fund IV, on a total of $2.6 billion, sister title PERE has learned. Through the fund, Sculptor will invest in real estate equity and debt across North America and Europe.
The vehicle is nearly 75 percent larger than its predecessor, Sculptor Real Estate Fund III, which attracted a total of $1.5 billion at its September 2014 final close. Fund I gathered $408 million in 2005, while Fund II corralled $840 million in 2011.
The real estate arm of New York-based alternative asset manager Sculptor Capital Management, formerly known as Och-Ziff Capital Management, launched Fund IV in 2019 with a target of $1.75 billion, according to PERE data. The firm raised $1.2 billion for the fund’s first close in October and had amassed more than $2 billion as of March 31. Sculptor declined to comment, but PERE understands that nearly 20 percent of Fund IV’s capital closed after the coronavirus lockdowns in March.
The fund has more than 100 limited partners, including public and private pension plans, financial institutions, sovereign wealth funds, endowments, foundations and family offices. Among the public pensions that committed to Fund IV were the Texas County and District Retirement System, which committed $125 million, and Seattle City Employees Retirement System, which earmarked $17.5 million.
The commitments were roughly equally split between new and existing limited partners. Of Fund IV’s capital, 90 percent came from North American investors, while 8 percent came from Asia and 2 percent from Europe.
With Fund IV, Sculptor will pursue the same strategy as those of prior funds in the series, investing in real estate and real estate related assets in both equity and debt across North America and Europe. The firm targets both traditional and non-traditional property sectors, including hotels, gaming-related property, multifamily residential, condominiums, senior housing, stadiums and exhibition spaces, marinas, convenience stores and gas stations.
However, the fund will have a higher geographic cap for investments outside of North America this time around – 33 percent compared with 20 percent for Fund III. Additionally, Fund IV is expected to be more heavily weighted to traditional property types than Fund III as pricing in traditional real estate undergoes a correction.
“I think we’re in a very fortunate position to have a lot of fresh capital that we can deploy in what looks to be a pretty target-rich market,” said chief executive Robert Shafir about Sculptor’s real estate investment themes during the firm’s first-quarter earnings call in May. “And probably, the more severe moves have happened in the public markets. And where we saw things that we thought were interesting opportunities in the equity or the credit side of the public markets that we thought were the right real estate exposures, we did some investing there.”
During the month of March, he noted that the firm “had a brief window to deploy capital into real estate at a fraction of value and replacement cost.”
He added that he saw opportunities in distressed debt over the medium term and in both traditional and nontraditional real estate, the latter of which “we’ve made our mark by being so diversified and playing in a lot of areas where a lot of our competitors don’t.”
Fund III was generating a gross internal rate of return of 28.7 percent, a net IRR of 18.7 percent and a gross multiple on invested capital of 1.6x as of March 31, according to the firm’s first-quarter earnings results. In its results, Sculptor reported gross IRRs of 25.5 percent and 32.9 percent; net IRRs of 16.1 percent and 21.6 percent; and gross MOICs of 2.2x and 2.0x for Funds I and II, respectively.
Sculptor Real Estate was founded by Steve Orbuch in 2003 and to date has invested in over $13.7 billion of real estate assets across 23 different real estate-related asset classes, including direct equity investments, preferred equity structures, senior loans, mezzanine loans, ground leases and other credit investments. The business has a team of more than 25 dedicated real estate investment professionals and asset managers located in New York and London.