Heitman Favors Defensive Assets With Its Investment Funds

Heitman recently closed three investment funds valued at $3.2 billion. The three funds include Heitman Value Partners V, Debt investment fund Heitman Debt Partners II and Global core plus fund and Heitman Global Real Estate Partners II. The equity commitments include co-investments.

“We were pleased to reach our targets, and in the case of Heitman Value Partners V and Heitman Debt Partners II, meet or exceed the funds’ hard caps,” Lewis Ingall, senior managing director at Heitman, tells GlobeSt.com. “Early in the pandemic we recognized the need to shift our approach in order to address the unique challenges that 2020 presented. This included moving meetings to the virtual environment and conducting the appropriate due diligence with limited partners in creative ways. In terms of our expectations, gleaning data from how real estate has behaved during periods of volatility and in the recovery period of an economic cycle, we believed that being in a position to deploy capital during the early recovery would provide attractive entry points and position our funds well for future growth.”

The three funds had a mix of domestic and foreign capital, with 60% US-based investors and 40% international capital. Overall, about 30% of the commitments were from first-time investors to Heitman’s funds. Heitman Value Partners V had $1.9 billion in equity commitments, surpassing the initial hard cap. Heitman Real Estate Debt Partners II has $500 million in equity commitments, which met the hard cap, while Heitman Global Real Estate Partners II secured $750 million in commitments.

The equity commitments on each fund illustrated the market’s recovery; however, with uncertainty remaining, Heitman is executing a conservative investment strategy. “There are certainly tailwinds creating favorable conditions for real estate investment; however, we still believe it’s prudent to deploy capital to defensive real estate sectors,” says Ingall. “Alternative real estate such as self-storage, medical office, and what we call the living sectors are these types of property sectors where demand is underpinned by secular, demographic trends that are delinked or less linked to economic cycles.”

Already, the three funds have made investments. According to Ingall, “HVP V has committed or deployed approximately $280 million of capital, or approximately 20% of the fund’s equity not including co-investment, in the direct equity of US property. HDP II has committed or deployed approximately $100 million of capital, or approximately 20% of the fund’s equity, to loans secured by property across the US. G II has committed or deployed approximately $80 million of capital, or approximately 11% of the fund’s equity, in the direct equity of global property.”

Over the next 12 months, the fund will invest across asset classes, including alternative properties like self-storage, student housing and medical office.