up CRE for Finesa's $200M DIP fund
anchored by Colombian pension funds.
HOUSTON-Finesa Real Estate Group has retained Transwestern Investment Management to buy, manage and dispose of commercial real estate assets for its $200 million Diversified International Partners private equity CRE fund. In its first capital raise, the fund closed on $70 million, attracting anchor commitments from three of Colombia’s pension funds.
Now in its second capital raise, DIP geared toward income-producing office, industrial, retail and multifamily properties throughout the United States. According to TIM managing director Juan DeAngulo, the fund is already hunting up likely assets, and negotiations have commenced on two properties.
“We’re focused on yield, cash-flow investment,” he explains. “We don’t want to buy empty buildings and take a ton of risk. Rather, we’re focused on executing a strategy on properties with cash flow in place, and some upside.”
The interesting component of DIP is that the capital is coming from high net-worth entities and pension funds in Colombia; investors interested in what the U.S. commercial real estate market has to offer. DeAngulo, who was raised in Colombia, tells GlobeSt.com that the idea of encouraging Latin American investment in U.S. real estate led to TIM’s partnership with Finesa, which was founded in 2002, is headquartered in Rockville, MD and has leveraged Latin American capital and relationships to buy CRE assets on the East Coast and Midwest in the past. The two partners have “developed a structure so that institutional and high net-worth investors in Colombia can invest in the United States,” De Angulo comments.
Anyone in the United States familiar with current economic conditions, sluggish job growth and the mixed bag of commercial real estate might wonder at the interest from Latin American investors, more specifically, Colombian pension funds. But DeAngulo says the interest isn’t so surprising, if one considers that opportunities at home aren’t quite so plentiful.
“The primary goal of Latin American investors coming into the U.S. is first, capital preservation and second, capital return,” DeAngulo says. “In Colombia, these days, they’re taking higher risks than what they might have in the United States.” And while the United States is going through the mudslinging and gridlock of a general election year, from the outside looking in, the country is considered a vastly stable investment, and a safe one.
Furthermore, notes Finesa Real Estate Group president and CEO Andres Gonzalez, the timing is absolutely right in the United States for commercial real estate investment from the outside. “If you look at this from a relative basis, Latin America has had a pretty good run on real estate during the past 10 years,” he tells GlobeSt.com. “Colombia, Brazil, Mexico; their asset prices are on the higher end, counter to what we’re seeing in the U.S. So investors have the possibility of investing in that asset class that’s done so well for them, and in a market where you have upside, as opposed to investing in the local market where upside is capped.”
Another attractive component of foreign investment in the United States is the currency. DeAngulo says the dollar is weak when compared to the Colombian peso. Currency 101 supports the idea that a weak dollar is a bonanza for foreign investors because it means foreign currency can buy more U.S. assets. In other words, “There’s potentially a lot of real estate upside in a country that is still perceived as a safe investment politically and financially,” DeAngulo explains. “On top of that, the investors get some potential currency upside as well.”
DIP is targeting commercial real estate in areas with solid demographics and growth; DeAngulo acknowledges a strong preference in areas in which Transwestern already has offices. Major metros are attractive, he goes on to say, as are many of the submarkets.
Gonzalez explains that previous Finesa funds have been somewhat more narrowly defined in terms of geography and assets – and DIP represents the first time in which Latin American institutional money is an important part of the capital raise. Previous Finesa funds have been supported by private money, he remarks.
But clearly those Colombian and other Latin American institutional investors have a keen interest in the U.S. “We exceeded our first closing by over 50% of our goal,” Gonzalez says. “We believe we’ll be able to fill up the fund to its maximum capacity by early next year.”