Wednesday, October 11, 2017

AIMCo, PSP Looking at US Real Estate?

Mark Heschmeyer of CoStar Group reports, Starlight Commences $1.3 Billion U.S. Multifamily Acquisition Program:
Toronto-based Starlight Investments has formed an institutional partnership with Canada's Public Sector Pension Investment Board and the Alberta Investment Management Corp. (AIMCo) to acquire up to $1.3 billion of multifamily properties across the southern and western regions of the U.S.

"We are entering into this newly formed partnership with great excitement and expectations," said Neil Cunningham, senior vice president, global head of real estate and natural resources at PSP Investments. "We are looking forward to working closely with Starlight and AIMCo to assemble a large, professionally managed, institutional quality portfolio of multifamily properties in select U.S. markets."

The partnership is looking to acquire recently constructed, garden-style multifamily communities in the suburban markets of Atlanta, Austin, Dallas, Denver, Orlando, Phoenix and Tampa. The partnership will target submarkets that demonstrate superior rental income growth potential due to positive multifamily dynamics including compelling population, economic and employment growth.

The partnership's first acquisition is Parkhouse Apt. Homes, a Class A, garden-style, multifamily property constructed in 2017 in the Denver suburb of Thornton, CO. The 465-unit complex at 14310 Grant St. sold for $121.6 million or about $261,505 per unit.

"We are extremely pleased to acquire the first in a number of multifamily properties with two prominent global institutions and continue the expansion of the Starlight U.S. multifamily platform," said Daniel Drimmer, CEO and president of Starlight Investments.

PSP Investments is one of Canada's largest pension investment managers with $135.6 billion of net assets under management as of March 31, 2017. Alberta Investment Management is one of Canada's largest and most diversified institutional investment managers with more than $100 billion of assets under management.
Real Estate News Exchange also reports, PSP Investments, AIMCo JV with Starlight on $1.3B venture:
Starlight Investments announced Tuesday morning it is partnering with the Public Sector Pension Investment Board and the Alberta Investment Management Corporation on a program to purchase US$1.3 billion worth of residential properties in five U.S. states.

While the program had been previously announced by Starlight, the partners had not been identified.

This morning’s announcement also said the partnership has made its first purchase, Parkhouse Apartment Homes in Denver. The 465-unit, class-A, garden style, multi-family property is newly constructed and located in one of the five target markets.

“We are entering into this newly formed partnership with great excitement and expectations,” said Neil Cunningham, senior vice-president, global head of real estate and natural resources at PSP Investments, in a release.

“We are looking forward to working closely with Starlight and AIMCo to assemble a large, professionally managed, institutional quality portfolio of multi-family properties in select U.S. markets.”

The partnership will target the suburban markets of Atlanta; Austin and Dallas, Texas; Denver; Orlando and Tampa; and Phoenix. Specifically, the partnership will target submarkets demonstrating superior rental income growth potential due to positive multi-family dynamics including compelling population, economic and employment growth.

“AIMCo is pleased to enter the partnership and excited about the opportunity to expand our multi-family footprint to new markets,” said Micheal Dal Bello, senior VP, Real Estate of AIMCo, in the release.

“The partnership capitalizes on the synergies of our respective investment programs and creates a long-term platform to generate the returns required of our clients and stakeholders.”

Major move for Starlight

Partnering with PSP Investments and AIMCo is a significant move for Starlight. The Toronto-based, privately held, full service, real estate investment and asset management company currently manages $7.5 billion of multi-family and commercial properties through funds, joint ventures and club deals.

Starlight’s portfolio consists of approximately 35,000 multi-family units, of which 24,000 are across Canada and 11,000 across the U.S., along with more than 4.6 million square feet of commercial properties throughout Canada.

“We are extremely pleased to acquire the first in a number of multi-family properties with two prominent global institutions and continue the expansion of the Starlight U.S. multi-family platform,” Daniel Drimmer, CEO and president of Starlight Investments, added in the release.

“We look forward to building a premium multi-family portfolio in conjunction with PSP Investments and AIMCo.”

Denver is one of the fastest-growing U.S. metro areas with the lowest unemployment rate. The city is consecutively voted as the best place for businesses to grow by Forbes, with employers continuing to relocate and add jobs at a considerably faster rate than the national average. Denver is also a city where millennials, who are a key renter demographic, are the largest and fastest growing population group.

Parkhouse is located in a prosperous northern corridor of Denver. The downtown is approximately 25 minutes to the south, providing easy access to major employment centres and entertainment. Within walking distance to Parkhouse is access to major retail hubs and local hospitals.

Parkhouse is a luxury complex consisting of 20 three-storey garden style apartment buildings, offering top of the market amenities including two clubhouses with fitness and business centres, a games room and a bike and ski repair shop. Outdoor amenities include two resort style swimming pools, outdoor kitchens, neighborhood parks and walking trails.
AIMCo, PSP and Starlight put out this press release which is also available in PDF here:
Starlight Investments ("Starlight") is pleased to announce its institutional partners in connection with its previously announced Partnership (the "Partnership") as the Public Sector Pension Investment Board ("PSP Investments") and the Alberta Investment Management Corporation ("AIMCo"), on behalf of certain of its clients. In addition, Starlight is pleased to announce that the Partnership has commenced its acquisition program with the purchase of Parkhouse Apartment Homes ("Parkhouse"), a 465-unit, Class "A", garden style, multi-family property constructed in 2017, and located in Denver, Colorado.

"We are entering into this newly formed Partnership with great excitement and expectations," said Neil Cunningham, Senior Vice President, Global Head of Real Estate and Natural Resources at PSP Investments. "We are looking forward to working closely with Starlight and AIMCo to assemble a large, professionally managed, institutional quality portfolio of multi-family properties in select U.S. markets."

"AIMCo is pleased to enter the Partnership and excited about the opportunity to expand our multi-family footprint to new markets," said Micheal Dal Bello, Senior VP, Real Estate of AIMCo. "The Partnership capitalizes on the synergies of our respective investment programs and creates a long-term platform to generate the returns required of our clients and stakeholders."

The Partnership was formed to acquire U.S.$1.3 billion of Class "A", recently constructed, garden style multi-family communities located in the suburban markets of Atlanta, Georgia; Austin and Dallas, Texas; Denver, Colorado; Orlando and Tampa, Florida; and Phoenix, Arizona. Specifically, the Partnership will target submarkets that demonstrate superior rental income growth potential due to positive multi-family dynamics including compelling population, economic and employment growth.

"We are extremely pleased to acquire the first in a number of multi-family properties with two prominent global institutions and continue the expansion of the Starlight U.S. multi-family platform," added Daniel Drimmer, CEO and President of Starlight Investments. "We look forward to building a premium multi-family portfolio in conjunction with PSP Investments and AIMCo."

Denver is one of the fastest growing U.S. metro areas with the lowest unemployment rate. The city is consecutively voted as the best place for businesses to grow by Forbes, with employers continuing to relocate and add jobs at a considerably faster rate than the national average. Denver is also a city where millennials, who are a key renter demographic, are the largest and fastest growing population group.

Parkhouse is ideally located in the prosperous northern corridor of Denver. The downtown is approximately 25 minutes to the south, providing easy access to major employment centres and entertainment. Within walking distance to Parkhouse is access to major retail hubs and local hospitals. Parkhouse is a luxury complex consisting of 20 three-storey garden style apartment buildings, offering top of the market amenities including two clubhouses with fitness and business centres, a games room and a bike and ski repair shop. Outdoor amenities include two resort style swimming pools, outdoor kitchens, neighborhood parks and walking trails. For more information, visit www.liveparkhouse.com.

About PSP Investments

The Public Sector Pension Investment Board (PSP Investments) is one of Canada's largest pension investment managers with $135.6 billion of net assets under management as of March 31, 2017. It manages a diversified global portfolio composed of investments in public financial markets, private equity, real estate, infrastructure, natural resources and private debt. Established in 1999, PSP Investments manages net contributions to the pension funds of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montréal and offices in New York and London. For more information, visit www.investpsp.com or follow us on Twitter @InvestPSP.

About Alberta Investment Management Corporation

Alberta Investment Management Corporation (AIMCo) is one of Canada's largest and most diversified institutional investment managers with more than $100 billion of assets under management. Established on January 1, 2008, AIMCo's mandate is to provide superior long-term investment results for its clients. AIMCo operates at arms-length from the Government of Alberta and invests globally on behalf of 32 pension, endowment and government funds in the Province of Alberta. For more information, please visit www.aimco.alberta.ca.

About Starlight Investments

Starlight Investments is a Toronto-based, privately held, full service, real estate investment and asset management company driven by an experienced team comprised of over 120 professionals. Starlight currently manages $7.5 billion of multi-family and commercial properties through funds, JV's and club deals. Starlight's portfolio consists of approximately 35,000 multi-family units, of which 34,000 are across Canada and 11,000 across the U.S., along with over 4.6 million square feet of commercial properties throughout Canada. For more information, please visit www.starlightinvest.com and connect on LinkedIn at www.linkedin.com/company/starlight-investments-ltd-.
I must admit, my first question after reading this was who is Starlight Investments and why are AIMCo and PSP partnering up with a Canadian fund to invest in US multifamily real estate?

So, I went digging into Starlight Investments' executive team which you can see here and below (click on image):


In particular, I honed in on Evan Kirsh who is the President of Starlight's US Multi-Family (click on image):

Notice Mr. Kirsh’s experience includes executive positions with Revera Inc., GWL Realty Advisors and MetCap Living Inc. as well as positions with Brazos Advisors, Citibank Canada and Manulife Real Estate (the global real estate arm of Manulife Financial Corporation).

Revera Inc. is a leading provider of retirement living homes, retirement communities & dedicated long-term care services for seniors which operates in Canada, the US and the UK. It is also fully owned by PSP and has been a great real estate platform for that fund.

So, that is the connection. There is no doubt Evan Kirsh is very experienced and knows his market well but it helps that he has a track record at Revera and knows Neil Cunningham very well. Neil is now PSP's Senior Vice President, Global Head of Real Estate and Natural Resources.

What is the AIMCo connection? Who knows, maybe PSP was looking for another large investor for this platform and approached AIMCo.

Whatever the case, this is a great deal to enter for a lot of reasons. I happen to think the Canadian dollar is very high and now is the time to pounce on US assets. I'm not particularly keen on US commercial real estate because I'm worried about deflation striking the US and think a lot of commercial real estate is outrageously overpriced with cap rates hitting record lows.

But I like the markets they're focusing on:
The partnership is looking to acquire recently constructed, garden-style multifamily communities in the suburban markets of Atlanta, Austin, Dallas, Denver, Orlando, Phoenix and Tampa. The partnership will target submarkets that demonstrate superior rental income growth potential due to positive multifamily dynamics including compelling population, economic and employment growth. 
And this too:
The partnership will target the suburban markets of Atlanta; Austin and Dallas, Texas; Denver; Orlando and Tampa; and Phoenix. Specifically, the partnership will target submarkets demonstrating superior rental income growth potential due to positive multi-family dynamics including compelling population, economic and employment growth.
In other words, the partnership is not focusing on overpriced prime markets, its focus will be on up and coming secondary markets which are experiencing strong growth trends and "superior" rental icome growth.

In other PSP real estate related news, Daniel Sernovitz of the Washington Business Journal reports the principals behind Hoffman-Madison Waterfront traveled the world to find the right equity partner for their mixed-use project, and they found it in one of Canada's pension investment managers. You can read it here (subscription required).

And in private equity, Benefits Canada reports, Ontario Teachers’, PSP Investments to acquire German ceramic manufacturer:
A consortium of funds that includes the Ontario Teachers’ Pension Plan and the Public Sector Pension Investment Board has reached an agreement to acquire CeramTec Group, a German manufacturer of technical ceramic components.

The company’s advanced ceramics are used across a number of different industries, including medical technology, the automotive industry, the electronics sector, energy and environmental technology, and equipment and mechanical engineering. Its portfolio comprises more than 10,000 different products, parts and components made of technical ceramics, as well as a large number of ceramic materials.

CeramTec Group also has a global presence with production plans and subsidiaries across Europe, the Americas and Asia. In the 12 months to June 2017, it generated revenues of 538 million euros. The company employs more than 3,400 people worldwide, with about 2,000 in Germany.

“We believe CeramTec has great potential to achieve profitable and sustainable growth, both organically and through acquisitions, and we look forward to working closely with the company’s management team and its employees,” said Stefan Zuschke, managing partner of BC Partners, the private equity firm advising the consortium of funds.

“We are pleased to be backing this transaction alongside BC Partners, Ontario Teachers’ and CeramTec management,” said Guthrie Stewart, senior vice-president and global head of private investments, at PSP Investments. “This is a perfect example of our strategy to invest in global leaders in order to support their management team and create long-term value, alongside world-class private equity investors such as BC Partners.”

Jo Taylor, senior managing director, international at Ontario Teachers’, noted the pension fund considers Germany to be a very attractive market.
You can read PSP's press release on this deal here. I don't have much to add except to state the obvious, CeramTec Group is a solid international company growing fast and when you partner up with OTPP on a deal led by private equity powerhouse BC Partners, it's a winning deal for all parties.

Below, Denver Mayor Michael Hancock says the economic boom his city is experiencing may be due to the millennial generation (2015). Hancock also says entrepreneurial opportunity has made the city flourish. I'm sure Colorado's decision to legalize pot also helped attract a lot of millennials to Denver.


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