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Crescent Real Estate has been busy allocating $250M of capital from its GP Invitation Fund II, which closed in April and could result in an investment portfolio as high as $4B in asset value.
Where is that money going? Crescent has its eye across the southern U.S. and views hotel, office, multifamily and senior housing assets as attractive development and investment prospects.
"As we deploy the capital, a typical structure would be the fund would own 10% to 20% of any given asset, and then we will fill out the balance of the equity either with our investor base or with others," Crescent co-CEO Jason Anderson said. "So, we will continue to raise capital on a deal-by-deal basis to get to that $4B of assets."
This is the second fund of its kind under the Crescent umbrella in the past four years. And much like Crescent’s GP Invitation Fund I before it, Fund II is already in high demand; seven investments have been completed.
With the latest fund, Crescent intends to push $250M in investment dollars from high net worth individuals into a pipeline of deals that could include everything from value-add acquisitions to development projects.
Fund II will focus a bit more than the first did on real estate development but is generally the same type of investment play as Fund I overall.
While there is no specific asset type or geographic region of preference, Crescent has an idea of what type of commercial real estate plays it wants this late in a real estate cycle.
"We are not fixated on one geography or one asset type, and we think that’s important in this market," Anderson said. "We like our ability to be able to do existing asset development — hotels, office and multifamily."
While Fort Worth-based Crescent has strong ties to development and investment activity in Texas and this fund will continue to invest there, the firm is keen on exploring a few other U.S. states for Fund II investment plays.
"Crescent’s history has always been in the South/Southwest. We’ve been very demographically driven," Anderson said. "The fund allows us the flexibility to invest anywhere, but we just have always kind of stuck to the markets and the areas that we’ve always known best."
Those target markets include Texas, Nashville, Florida, Colorado and the Carolinas, Anderson said.
With hotel supply-constrained in some U.S. markets and hotels often run inefficiently by smaller owners, Crescent sees some opportunity to invest in hotel value-add projects as well as new development.
"It’s hard out there, so we don’t view this as ‘hey, this is the perfect time to buy hotels, and we should buy any and all hotels that we can,’" Anderson said. "But, I think we will continue to find interesting hotel deals. The same thing is true on the office side … We’re also doing a decent amount of senior housing that we’ve been doing and expect to do in Fund 2."
Hotel opportunities from the ground up or value-add perspective also are attractive given where capital is at this point in the cycle, Anderson said.
"I also think late in the cycle some people have just not been interested in buying hotels," he said. "In general, they are nervous about where we might be in the cycle; and I think that creates some buying opportunities as well."
Fund II closed in April, and to date, it has invested into a 473-room Westin Riverwalk hotel in San Antonio and a 1.1M SF office portfolio in Colorado Springs.