By Jon Peterson
Los Angeles-based Coretrust Capital will be considering investing capital in office buildings located in the San Francisco Bay Area and Seattle as part of its new investment fund, Coretrust Value Fund I. Its other areas of interest are the Mid-Atlantic region, Los Angeles and the three Texas cities—Dallas, Houston and Austin.
This is a fund that the real estate manager has established with the financial backing of Hawkeye Partners. The Austin, Texas-based real estate investment manager has initially agreed to invest $200 million into Value Fund I with the ability to invest another $100 million in the fund in the future. This amount represents all of the outside capital invested in the fund.
The capital invested by Hawkeye Partners is supplied from its own commingled fund, Scout Fund II. This is a commingled fund where the manager looks to invest in new and emerging managers.
Coretrust Capital fits the bill as a new manager. The company was formed in 2014 by three original partners of Los Angeles-based Thomas Properties Group, John Sischo, Randy Scott and Tom Ricci, who are all managing principals with the new firm.
“We are very excited about the capital commitment from Hawkeye Partners. This is exactly the kind of relationship we were hoping to form when we started the company,” says John Sischo.
“The Scout Program is designed to identify the next generation of real estate managers. Investors today are faced with challenges of sourcing in a competitive market and maximizing investment returns,” said Claudia Faust, a manager partner with Hawkeye Partners in a prepared statement.
Value Fund I initially will have a total capitalization of around $900 million. The three principals of Coretrust Capital will be making a co-investment into the commingled fund. Sischo declined to state what the amount of the co-investment is. The leverage component on the fund is around 65 percent.
The commingled fund will only be investing in existing office buildings that have a value-added component. “These would include assets that have vacancy issues, properties that need to be repositioned or are in need of improvement management. Our business plan is to buy the asset, fix it and then sell to a core capital source in the future,” said Sischo.
The targeted returns for Value Fund I is a 16 to 18 percent net IRR. The investment period for the fund is two years, which commences today. There are no assets in the fund at this time, but Coretrust Capital is hopeful of finding its first deal for the fund by the end of the year.
Hawkeye Partners formed Scout Fund II in 2014. There was a total of $533 million of equity raised to go directly into the fund. There was an additional $100 million raised for a side-car vehicle for the commingled fund. This capital will be used to co-invest on specific investment opportunities with the commingled fund.
Some of the investors in Scout II were a $75 million from the State of Wisconsin Investment Board, $50 million from Teacher Retirement System of Texas and $30 million from Pennsylvania State Employees Retirement System. One other investment made by Scout II was a $175 million investment with Blue Moon Capital Partners for its Blue Moon Senior Housing I fund.