By Meghan Hall
After nearly 20 years in business, San Francisco-based Prado Group has closed on its first investment fund. Called the Prado Alpha Fund, the initial closing raised $200 million from a variety of high-net-worth individuals and investors and will usher the Prado Group into a new era for the company within the commercial real estate industry.
“The Fund was really well received,” said Prado Group’s Co-CIO and Head of Acquisitions, Zach Felson. “I think there was a general attitude that people wanted to invest, and that we had a fair amount of investors who had heard of us or seen us, but hadn’t had the opportunity to invest, so I think there was real interest.”
Established in 2003, Prado Group is a privately-held real estate development and investment firm. Over the course of its history, the company has focused on a variety of assets including, residential, retail, office and mixed-use. Prado Group has made over 80 investments and currently has a development pipeline totaling $3.75 billion with $1.4 billion in realized investments. The initial closing of the Prado Alpha Fund will help the company continue to expand its reach in high-barrier markets and allow the firm to move much faster to close deals–a key element of success in ultra competitive markets such as the San Francisco Bay Area and Seattle.
“We can be pretty flexible and creative,” said Felson.
The Prado Group anticipates a second closing in the next few months, at which the fund is expected to close at $250 million. The Fund will have a 15 year life and will allow Prado Group to deploy capital to buy existing properties or develop, and hold those assets in perpetuity. While Prado Group could buy assets directly, the firm is primarily looking to leverage the capital up and seeks to acquire more than $4 billion of existing and development properties across key “innovation hubs.”
The Fund will be targeting core-plus, value-add and opportunity real estate in high-growth regions. While Prado Group can invest the funds directly, it is hoping to primarily make GP co-investments and GP investments to allow the Fund to stretch further.
Geographies of interest for the company not only include the San Francisco Bay Area and Seattle, but Southern California, Denver, Austin and Nashville.
“All of those markets, in our minds, are innovation markets where there is a strong research institution and university and a strong confluence of tech,” Felson noted.
Although the Fund has closed at a time when the commercial real estate market has contracted, Prado Group is confident that its investments will be put to good use. Felson emphasized that the Fund’s investors–as well as the company–are confident in the historical performance of their core markets and ready to deploy capital as commercial real estate trading resumes at a quicker pace.
“Over the last two decades, Prado Group has achieved very strong returns by aligning with forward-looking and connected partners while executing deep value-add strategies in dynamic high growth, high barrier markets,” said Zach Felson, Co-CIO and Head of Acquisitions at Prado Group. “The data shows that the innovation regions, their world-class educational institutions, powerful venture capital infrastructure, and dynamic work-play environments will continue to attract the best and brightest companies, ambitious career builders, and financial change-makers who transform great ideas into enduring real estate demand.”