“We will focus on acquiring existing assets with a value-add component to them,” says Cortese. “Some examples of this are historic office buildings that we convert into creative-office space. We have completed a few creative-office conversions in San Francisco and Los Angeles, so we want to build on that success. We will also target specialty retail properties that provide that experiential shopping experience, which helps mitigate the Amazon effect that is challenging many of the big-box centers and shopping malls.”

The investment company is looking at properties that can achieve leveraged IRRs in the range of 13% to 15%. The leverage placed on the fund will be on a 65% loan-to-cost basis. The company looks to hold onto assets for three to five years.

We spoke with Cortese about the decision to launch the fund and how its target investor group fits into that decision.

GlobeSt.com: How you decide to launch a fund?

Cortese: It was a process for us that involved creating infrastructure internally, a strong track record and a relative client base that we felt would be well served by the ability to spread investment capital across multiple assets. Since 2010, we have acquired around $150 million of commercial real estate on a direct basis for clients who gave us mandates to find them certain kinds of real estate investments. We found that, in many cases, those investors could really use help to understand the complexities of acquiring and managing a commercial property. They needed the up-front analysis and ongoing service profile we offered to make the investments successful. Around two years ago, it was clear to us that we could be even more effective if we had discretionary capital available when good opportunities presented themselves and the concept was well received by our clients. I am not sure if everyone who decides to launch a fund goes through a similar process, but for us it was a good way to execute upon our long-stated goal of investing in real estate.

GlobeSt.com: Whom you target to invest?

Cortese: We target high-net-worth individuals, family offices, trusts and registered investment advisors who have funds of funds within their investment-management platform. The reason we have targeted this group of investors is that they are aligned with our current client profile. In fact, we manage, lease and or provide other real estate services to every one of these groups except for RIAs (a new target investment group for us, but a target given their interest in real estate as an alternative investment).

GlobeSt.com: What is unique about a fund that caters to high-net-worth individuals, family offices, trusts and registered investment advisors?

Cortese: I don't know that a fund that caters to our target investor is necessarily unique in and of itself. We have found that our company is a natural extension of the wealth-management program for our client base, and we get a lot more than just financial remuneration for supporting the growth of their investments. It is gratifying to hear positive feedback from our clients relative to our successes and to deliver what we internally characterize as “world-class service.” I suppose that is really the most unique thing about a fund like ours: we get to measure the value we create through direct investor feedback as well as the returns we deliver.

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SAN DIEGO—The Heritage Group realized that it could be even more effective if it had discretionary capital available when good opportunities presented themselves, and the concept was well received by its clients, managing director Rocco Cortese tells GlobeSt.com. The San Diego-based real estate firm recently launched its first fund product, the Heritage Core Value Fund, and is planning a $50-million equity raise for it.

With leverage in place, the company expects a total capitalization of the fund to be in the range of $100 million to $125 million. Target investors in the fund will include a mixture of high-net-worth individuals, family offices, trusts and registered investment advisors.

Cortese says, “Based upon our growth as well as the success we have had making individual investments for our current clients, a discretionary Fund product is a natural addition to our platform.”

Besides San Diego, Heritage plans to expand its hold in the Los Angeles and San Francisco markets by adding 10 to 12 properties in its new commingled fund, with the deal size ranging from $5 million to $20 million. The company is interested in buying assets that are located both in downtown and suburban locations.

“We will focus on acquiring existing assets with a value-add component to them,” says Cortese. “Some examples of this are historic office buildings that we convert into creative-office space. We have completed a few creative-office conversions in San Francisco and Los Angeles, so we want to build on that success. We will also target specialty retail properties that provide that experiential shopping experience, which helps mitigate the Amazon effect that is challenging many of the big-box centers and shopping malls.”

The investment company is looking at properties that can achieve leveraged IRRs in the range of 13% to 15%. The leverage placed on the fund will be on a 65% loan-to-cost basis. The company looks to hold onto assets for three to five years.

We spoke with Cortese about the decision to launch the fund and how its target investor group fits into that decision.

GlobeSt.com: How you decide to launch a fund?

Cortese: It was a process for us that involved creating infrastructure internally, a strong track record and a relative client base that we felt would be well served by the ability to spread investment capital across multiple assets. Since 2010, we have acquired around $150 million of commercial real estate on a direct basis for clients who gave us mandates to find them certain kinds of real estate investments. We found that, in many cases, those investors could really use help to understand the complexities of acquiring and managing a commercial property. They needed the up-front analysis and ongoing service profile we offered to make the investments successful. Around two years ago, it was clear to us that we could be even more effective if we had discretionary capital available when good opportunities presented themselves and the concept was well received by our clients. I am not sure if everyone who decides to launch a fund goes through a similar process, but for us it was a good way to execute upon our long-stated goal of investing in real estate.

GlobeSt.com: Whom you target to invest?

Cortese: We target high-net-worth individuals, family offices, trusts and registered investment advisors who have funds of funds within their investment-management platform. The reason we have targeted this group of investors is that they are aligned with our current client profile. In fact, we manage, lease and or provide other real estate services to every one of these groups except for RIAs (a new target investment group for us, but a target given their interest in real estate as an alternative investment).

GlobeSt.com: What is unique about a fund that caters to high-net-worth individuals, family offices, trusts and registered investment advisors?

Cortese: I don't know that a fund that caters to our target investor is necessarily unique in and of itself. We have found that our company is a natural extension of the wealth-management program for our client base, and we get a lot more than just financial remuneration for supporting the growth of their investments. It is gratifying to hear positive feedback from our clients relative to our successes and to deliver what we internally characterize as “world-class service.” I suppose that is really the most unique thing about a fund like ours: we get to measure the value we create through direct investor feedback as well as the returns we deliver.