A premier placement agent with 25+ years and $25+ billion of institutional investor capital raising experience across the globe.
Below is a select list of prior assignments.
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Today a record number of real estate funds are in the market, targeting nearly $200 billion in capital, which leads one to ask, “What is piquing institutional investor appetite?”
The competitive landscape to secure new commitments for real estate investments from institutional investors has become more crowded, due to the increasing number and size of investment funds, co-investments, ventures, club deals and separate accounts. Many investors of all sizes and types are exploring, to the extent viable for them, alternative vehicles that may provide greater investment discretion/control and decreased fees/higher net returns, compared with commingled funds.
Over the past year, Triton Pacific Capital’s senior marketing team engaged in more than 450 meetings/calls with institutional investors — including public and private pensions, foundations, endowments, insurance companies, family offices/wealth managers, and funds of funds with assets under management of $1 billion to more than $100 billion — and their consultants, and was able to gain valuable insights into how key decision makers are thinking, how GPs can stand out, and which strategies resonate.
The bar for managers seeking capital continues to be set higher, with the added challenges of investor concerns about: (1) the point in the current economic cycle, (2) the amount of dry powder/unfunded commitments, and (3) lower transactional volume. This is compounded by investors re-upping with — and allocating more capital to — their existing managers. With the maturing of the real estate private markets, investors have “culled the herd,” preferring to make more commitments to “high conviction managers.” As such, GPs looking to expand and diversify their investor bases must bring something extra to the table.
The managing director of an endowment commented, “I gain exposure to the broad asset types in the large diversified funds, which lay the core building blocks, and we have been filling in the portfolio with regional and sector specialists.”
Most investors meet with several hundred managers a year and review vast quantities of information, and things can begin to blur. Differentiating characteristics, preferably linked to providing some level of competitive advantage in the market, are an increasingly important determinant in their early screening processes.
The CIO of a wealth manager explained: “We do not target particular sectors or strategies but have a ‘bottom up’ approach. Our philosophy is to find managers with unique skills that are not competing in a crowded space, and their strategy is hard to replicate. We seek groups that are highly differentiated but not to the point that they can’t find deals in their markets.”
The most frequently cited differentiators that provide some level of competitive advantage are described below:
Vertically integrated sector/regional specialists and allocators. While there continues to be significant interest in allocator funds, the appetite for smaller, vertically integrated investors/operators is growing. There is the perception that vertically integrated operators can produce stronger property-level performance. Investors with this view presume this generally also will lead to a higher component of returns from income rather than capital appreciation, and many investors believe cash flow is all-important at this point in the cycle.
Although opinions vary on this topic, a managing director of a corporate pension fund noted, “We did an analysis of our portfolio between vertical operators, sector specialists, allocators and hybrids, and the sector-specific and vertical operators outperformed in all cycles, and the allocators came in last.”
Through-cycle track record and no style drift. Given the duration of the current economic cycle, and the expectation that another downturn will eventually occur, LPs are digging much further into the details on track records, and trying to understand whether returns were merely buoyed by a “rising tide” or if the GP truly added value at the property level.
The director of pensions for an insurance company said, “I want to see teams that are ‘bending cost curves’ and can drive NOI growth, rather than just buying low and selling high.”
Investors are looking for disciplined buying and selling behavior, as well as consistency with strategy and team. The director of real assets at a public pension plan said, “My concern is with GPs that have historically focused on value-added strategies, moving into debt or core-type strategies and open-end vehicles, as that is a real distraction to what I hired them for originally.”
Markets, sectors and strategies
The United States continues to be the most stable market and the preferred country for real estate investments, although it was acknowledged that after a couple of years of solid distributions and significant dry powder, it has been getting harder for managers to find good deals. LPs still have capital but are not in a hurry to invest at this point in the cycle, particularly if their current commitments are being deployed slowly.
The senior vice president at a consultant noted, “On a risk-adjusted basis, we still like the United States the most. Markets are relatively stable; there are some small pockets of oversupply, but overall it has been a more disciplined development cycle.”
A senior consultant commented, “The market is tough at the moment, as there is an abundance of available capital. The good managers don’t want to pay the high prices and are sitting on their hands and basically treading water.” While other managers are finding attractive deals, transaction volume was down across the board in 2017.
Sectors. Given the diversity of investors and consultants that we spoke with, it is not surprising that the range of investment strategies was broad. However, there were some common themes expressed.
In terms of sectors, 40 percent mentioned they would like to increase their exposure to the specialty sector, followed by industrial (34 percent), and retail (26 percent). In this environment, investors are considering more defensive strategies to generate core-plus and value-added returns, while others are turning to subsectors and less traditional segments where they view the stability and durability of cash flows to be of greater value. The managing director of private markets for an endowment noted, “We like NNN lease and medical office strategies, as they both represent solid aggregation strategies with reliable exits.”
There has been much talk about the impact of technology on real estate and, in particular, on the industrial and retail sectors. Whereas growth in distribution and last-mile fulfillment is driving the interest in the industrial sector, the opportunity in retail is driven by dislocation, adaptive re-use and repositioning. Investors say industrial and retail are high on their list of property types, but with more caveats than before.
The interest in retail is understandably much more selective, and views differ on what is compelling:
Respondents generally had reached their office allocations or were not seeing opportunities in the sector, other than tech-related or creative office space. The question remaining in many major metro areas is what the overhang of available space will be, given the changes in the market coming from creative office space, as well as traditional and tech-related temporary space by providers such as Regus and WeWork Cos.
A member of the research team at a city pension fund observed, “The market is very competitive, and finding good deals is challenging. My view is that multifamily is the only sector that is overbuilt, other than workforce housing, and there are relatively good fundamentals for the other sectors. There are still opportunities, but it is slim pickings.”
Debt. Debt continues to garner interest, and the majority of respondents were positive about the strategy, as being lower in the capital stack is looking like a safer place to weather future storms. Some investors view whole-loan real estate debt origination as a proxy for core equity because of the current environment of historically low cap and interest rates. While they acknowledged that a lot of capital has been raised for private credit, and yields have compressed, they remain interested. Conversely, a number of foundations and endowments said the returns from whole loans and even mezzanine positions were simply too low for them.
International markets. There is a general perception that the European markets are not as far along in their recovery as the United States, and 43 percent of respondents indicated they were looking to increase their allocations to Europe. Given the impending Brexit, there is more interest in continental Europe, in particular Germany followed by Spain; however, most respondents said they prefer a Pan-European strategy rather than a single-country fund.
Approximately two-thirds of investors with an interest in emerging markets are spending time in Asia and are expanding their area of interest beyond China to the ASEAN countries. Geopolitical concerns are pronounced, but the growth in trade, manufacturing and population is compelling.
While most capital has stayed on the sidelines for Brazil and other Latin American countries, a few larger, more opportunistic investors have been in the market. The story may be different in 2018 because inflation and interest rates are easing, and the public markets have made a material comeback.
For real estate GPs, forming institutional investment relationships has become more competitive, and the bar continues to be raised for managers. The availability of capital remains high for real estate, but it has been spread across a growing number of investment vehicles that include funds, joint ventures, separate accounts, club deals and, of course, co-investments. At the same time, managers cannot ignore the importance of diversifying their LP base, as this is essential to their long-term franchise value. As institutions look for differentiators to justify investment in new GPs or expanding relationships with existing ones, in the same or new strategies, articulating one’s value proposition and unique characteristics is ever more critical to capturing the attention of the institutional investor market.
Bob Vogelzang is a partner at Triton Pacific Capital, a global placement agent founded in 1996 with more than $35 billion in capital-raising experience.
Ms. Wright has a strong professional background in executive support, with over 10 years of experience.
She manages multiple high priority assignments, and provides assistance with responding to client and investor related needs including: meeting logistics, client marketing/presentation materials, and meeting coordination.
Ms. Wright earned a Bachelor of Science from Cal State University of Long Beach.
Ms. Trave has an extensive background in the financial services industry that includes logistics, administrative process, project management, and office management. She manages the NYC office and assists the team with database management, research, client reporting, and all day-to-day operations.
Ms. Trave earned a Bachelor of Arts from Elon University and completed graduate work at Wake Forest University.
Ms. Bordelon has extensive experience in supporting senior executives and office management. Her background in administrative operations and providing top level support contributes to the team as she oversees key tasks including meeting coordination, research, and client marketing/ presentation materials. She manages the day to day operations of the LA office and assists with project management.
Ms. Bordelon earned a Bachelor of Arts from the University of California, Irvine.
Ms. Dowling has over 10 years of experience providing critical support to executives and staff. Her breadth of experience in project and office management serve as a strong foundation as she assists the team with project management, research, investor reporting, road shows and marketing. She is also responsible for updating and managing the database.
Ms. Dowling graduated cum laude from Binghamton University (SUNY) with a Bachelor of Arts, dual major in Psychology and Philosophy.
Mr. Abel has over 15 years of project management, investment banking, financial advisory, and institutional marketing experience. Prior to joining Triton Pacific Capital, he held fund placement positions at BerchWood Partners and Eaton Partners, where he focused primarily on the origination and project management of private equity and energy fund mandates. Prior to, Mr. Abel held fundraising positions at Denham Capital Management, where he executed over $3.0 billion in capital commitments, and Brookfield Asset Management, where he served as a project manager for the marketing of both private equity funds and direct investments.
Previously, he executed fundraisings totaling over $4.5 billion at Wayzata Investment Partners. Mr. Abel began his career in Institutional Fixed Income Sales at KeyBanc Capital Markets. Mr. Abel holds a Bachelor of Arts in English from the University of Vermont. He is an SEC / FINRA Registered Representative (Series 7 and 63) and a Registered Private Securities Offerings Representative (Series 82).
Mr. Varma has over 10 years of principal investing, investment banking, project management and consulting experience. Prior to joining Triton Pacific Capital, Mr. Varma was an investment and project management professional at Regent Properties, a $1 billion AUM real estate private equity firm based in Los Angeles. Prior to Regent, he worked in private equity and real estate fund placement at Probitas Partners in San Francisco, as a project manager responsible for the execution of over $3 billion of institutional capital for investment managers.
Prior to Probitas, Mr. Varma worked in the investment banking division of Jefferies & Company, where he focused on mergers, acquisitions and capital raising for middle market companies. Mr. Varma began his career as a management consultant at Deloitte Consulting.
Mr. Varma earned a Bachelor’s degree in economics and international relations from the University of Pennsylvania and an MBA from the UCLA Anderson School of Management, where he was a Deutschman Fellow. He is an SEC / FINRA Registered Representative (Series 7 and 63).
Mr. Pearce has over 10 years of private equity, energy, capital raising and financial consulting experience. Prior to joining Triton Pacific Capital Mr. Pearce spent 5 years with First Reserve where his responsibilities included fundraising, investor relations, financial analysis, and marketing planning and strategy. While at First Reserve Mr. Pearce assisted in raising over $7 billion across three energy funds.
He previously was a as Team Leader and Senior Consulting Associate at Cambridge Associates. During his time with Cambridge, Mr. Pearce assisted institutional clients on a wide range of investment and financial related issues including: portfolio construction theory, asset class logistics, in-depth portfolio and investment analysis, investment manager selection and due diligence, current market analysis, etc. His primary focus at Cambridge was in private market portfolios, including private equity, venture capital, private real estate, and private natural resources.
Mr. Pearce earned a Bachelor of Science in economics from Duke University. Mr. Pearce is a CFA Charterholder and an SEC / FINRA Registered Representative (Series 7 and 63).
Ms. Bazile has over 12 years of real estate client service, capital raising, research and investment consulting experience. Prior to joining Triton Pacific Capital, Ms. Bazile was responsible for client service and marketing for institutional real estate investors at J.P. Morgan Global Real Assets and investors across all assets classes at Commonfund. Prior to Commonfund, she established the first internal research department at Cohen Asset Management in Los Angeles. Prior to Cohen, Ms. Bazile worked at CBRE Econometric Advisors where she provided customized research and advisory services to owners and investors of commercial real estate. Ms. Bazile began her career as an Investment Consulting Associate at Cambridge Associates.
Ms. Bazile is a CAIA Charterholder and an SEC / FINRA Registered Representative (Series 7 and 63). She holds a Bachelor of Arts in Economics from Tufts University.
Ms. Stanidis has over 19 years of capital raising and financial advisory experience. She was previously based in Heitman’s London office, and had responsibility for raising nearly $1 billion in institutional capital for European and US real estate investment products. Prior to joining Heitman, she was involved in investment/finance products for pension funds with Old Mutual Properties; real estate project and portfolio finance at Nedcor Investment Banking Group; and property management, leasing, valuations and finance at Jones Lang LaSalle in London.
Ms. Stanidis earned a Bachelor of Business Science from the University of Cape Town, South Africa, and both an MSC. in Property Finance and Investment as well as a Masters in Property Law and Valuations from The City University in London, England. She was a Member of the Royal Institute of Chartered Surveyors and is an SEC / FINRA Registered Representative (Series 7 and 63).
Mr. Harris has over 30 years of capital markets and funds placement experience during which time he has been responsible for capital raising initiatives in excess of $40 billion.
Prior to Triton, Carter co-founded and led for more than 9 years a private placement business for Karis Capital Partners and its predecessor firm, Knight Capital Partners. From 2002 to 2006, Carter established and was head of Debt Capital Markets for the Americas for Nomura Securities International and led a wide variety of global financing transactions. Prior to Nomura, Carter was a Managing Director in the Capital Markets Group for Merrill Lynch, where he spent 18 years.
He received his MBA from the Tuck School at Dartmouth College and his undergraduate degree from the University of Kentucky. He is a registered Securities Principal.
Mr. Vogelzang has over 25 years and more than $15 billion of capital raising and financial advisory experience. He has been with Triton Pacific Capital for 20 years and has been actively serving Triton Pacific’s clients in the successful execution of various institutional equity investment transactions including private equity placements, discretionary funds, joint ventures, portfolio recapitalizations and mergers and acquisitions. Mr. Vogelzang brings a depth of hands-on transaction and financial advisory / investment banking experience to Triton Pacific.
Prior to joining the firm in 1997, Mr. Vogelzang had transactional management responsibilities for acquisitions, dispositions, structured debt and equity financing, strategic advisory and consulting with several investment and financial advisory firms including Lincoln Property Company, Wells Fargo, and Arthur Andersen.
Mr. Vogelzang earned a Bachelor of Science degree in finance and marketing from the University of Southern California. He serves on the Membership Committee of PREA and is also a Registered Securities Principal.
Mr. Davis has over 30 years and over $30 billion of capital raising and financial advisory experience. Since founding Triton Pacific Capital (“TPC”) in 1996 and under his guidance, TPC has successfully facilitated a myriad of transactions involving private placements, discretionary funds, joint ventures, club deals, portfolio recapitalizations and mergers and acquisitions across the real estate, private equity, infrastructure and energy sectors.
Prior to founding TPC, Mr. Davis held a variety of senior financial advisory/capital raising positions including Partner-in-Charge, Capital Markets at Arthur Andersen & Co. and Vice President, Investment Banking at Morgan Stanley. Mr. Davis was also the co-founder, and member of the Investment Committee, of a two private equity firms, one making control investments in growth companies in the US and another making real estate investments in the US. Mr. Davis has sold his interests in these firms and neither he nor TPC have any continuing ownership interests in nor any management or investment committee role with these companies.
Mr. Davis is a frequent speaker on various investment and capital markets topics, has authored a variety of articles for publications such as The Wall Street Journal, Barron’s, Institutional Real Estate Investor, PREA Quarterly, and Forbes and also been an advisor, board or committee member for a variety of organizations such as the Institutional Investing in Infrastructure Conference, Institute for International Research, Institutional Real Estate, Inc., Pension Real Estate Association (“PREA”)’s Conference Committee, etc.
Mr. Davis earned a Bachelor of Science degree from the University of Arizona and a Masters of Business Administration degree from Arizona State University. He is a Registered Securities Principal.