Bain Capital raised $1.5 billion for its debut real estate fund, surpassing the original $1 billion target, as investors pour record amounts of capital into the industry.
Harvard University's endowment is among the biggest backers of the fund, which focuses on niche areas like life sciences and labs, senior housing and self-storage, Bain executives said in an interview. Other investors include the Los Angeles County Employees Retirement Association, which committed $100 million earlier this year. Bain also contributed more than a 10th of the capital raised.
“The scale of the fund was established consciously to reflect a sensible level of capital for this strategy and where we are in the market,” said Daniel Cummings, a managing director and head of the real estate team who joined Bain from Harvard's $39 billion endowment early last year.
Assets in private equity real estate funds surpassed $900 billion last year despite growing concerns about elevated property prices, according to financial information firm Preqin. A significant amount of the growth has been driven by private equity firms like Blackstone Group LP and Brookfield Asset Management Inc. that have been raising ever-bigger mega funds to buy assets around the globe.
Boston-based Bain has already invested about $550 million from the fund, and plans to have around a dozen joint ventures with experts in different property segments as it deploys the capital, the company said. Leverage on acquisitions can run as high as 65%.
Branching Out
While Bain had exposure to real estate throughout its portfolio, it was late compared with peers in formally diversifying into the asset class. The alternative investment firm, which was co-founded by former Republican presidential candidate Mitt Romney in 1984, manages around $105 billion. It previously expanded from buyouts into venture capital and credit funds and has also carved out specialties such as life sciences.
Bain's entree into real estate came in 2018 when it hired the team from Harvard's endowment. The firm also agreed to take over $3.4 billion of real estate assets from the Boston-based endowment, which was downsizing operations and seeking to outsource much of its asset management.
While Harvard's endowment returns have lagged peers, real estate was for years its best-performing asset class, and Cummings was the university's highest-paid employee in 2016, making $23.8 million. The team's strategy at Bain is the same it used at Harvard, and it has been expanding the staff.
Portfolio Sales
Bain has also been liquidating some properties from the portfolio it manages for Harvard.
In September it sold more than 100 so-called last mile delivery warehouses in the southeastern U.S. around Atlanta to Blackstone for about $950 million. The university paid around $560 million for most of the properties beginning in 2014 through a local partner, Bloomberg previously reported.
In April, Bain also sold a life sciences building in Cambridge, Massachusetts, for $128 million. The team has invested in more than 3 million square feet of life sciences and lab space, making it one of the biggest players in the sector.
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