Crow Holdings Closes CRE Fund at an Oversubscribed $2.6B

Crow Holdings, a national real estate investment and development firm, has announced the final closing of Crow Holdings Realty Partners IX, L.P. 

Managed by Crow Holdings’ investment management company, Crow Holdings Capital, the fund invests in value-add real estate assets across the US, primarily in industrial and multifamily as well as in specialty sector opportunities.

Fund IX was oversubscribed with approximately $2.3 billion of commitments, above its original hard cap of $2 billion, and received strong support from existing investors and significant participation from new investors including global banks and insurance companies, pension plans, family offices and high net worth individuals. 

The fund has also closed on co-investments totaling $265 million in equity capital, resulting in approximately $2.6 billion in total investable equity for the strategy. Fund IX marks the firm’s largest fundraise to-date and is a significant increase from the $1.3 billion of commitments raised for the predecessor fund.

Trust Leads to ‘Oversubscribed’ Funds

Neil Schimmel, CEO, IMG, tells GlobeSt, “For fund managers or sponsors with solid track records, oversubscription seems to be the ‘new normal.’ These fundraises are only successful when you have earned a high level of trust with your investor network.

“Track records have become a critical, deciding factor for investors. They want to know how sponsors shepherded their portfolio through the COVID-19 crisis, or after the impacts of the Great Recession. Was the sponsor transparent and communicative? Have they succeeded in maximizing the return on past investments? Or, did they ‘go dark’ during the market downturn?”

Schimmel said that having a proven track record is critical to receiving continued support from existing investors and to attract new investors to a platform.

Crow Goes for Diversified Value-Add

The Crow Holdings fund focuses on diversified value-add investment and development opportunities in multiple property types across major US markets. These opportunities today are primarily in industrial and multifamily as well as specialty sectors including manufactured housing, convenience and gas, self-storage, and student housing. 

Entirely raised during the pandemic, the fund also began investing during this challenging time. To date, more than 63% of the fund’s capital has been committed across 62 investments, located primarily in the high-growth Southwest, Southeast and Mountain regions of the U.S.

“This successful close demonstrates appreciation for our firm’s early recognition of the significant tailwinds behind logistics and e-commerce demand, shifting population demographics, and changing housing preferences as integral to our differentiated investment strategy,” says Michael Levy, CEO of Crow Holdings, in prepared remarks.

Perhaps Focus on Cold Storage and Parking Garages

Diversification of holdings in an investment fund is wise, but the lack of a central theme to portfolio construction increases the risk of mission drift jeopardizing expected returns, C.J. Follini, principal, Noyack Capital, tells GlobeSt, adding that “$2.3 billion is certainly an eye-opener.”

“A thematic approach – such as targeting logistics infrastructure, albeit one with a broad definition of the delivery of goods and services ie. logistics – allows for more attractive pricing while still yielding economies of scale in management and more importantly, at the time of portfolio disposition,” Follini said.

Additionally, “By including all asset classes into one large fund, you are shrinking the potential universe of en masse portfolio buyers,” Follini said.

Considering pricing for dry warehouses, “they are at all-time highs,” Follini said, “attributable to capital’s indiscriminate search for yield in a zero-interest rate environment rather than the intrinsic value of the cash flow and underlying real estate. Simply put, they have become real estate bonds.

Follini said he prefers to direct a portion of those funds to cold storage or parking garages that allow for greater revenue enhancement. 

“Frankly, cold storage looks to be the next great asset class for the coming decade. Every tailwind of the transformative digitization of the U.S. economy supports an exponentially greater demand for sold storage to be built that doesn’t currently exist.

“And with parking garages, in a few years they will be called mobility hubs; mixed-use structures that support cold kitchen distribution, multi-tenant cold storage, driverless vehicle storage and Amazon drone delivery spokes.”