Farallon Capital Management the $19 billion investment firm founded by Thomas Steyer, has raised $375 million for its first U.S. commercial property fund.
San Francisco-based Farallon Real Estate Partners fund is targeting income- producing office, multifamily, retail and industrial properties, according to a statement from the firm. The investments will primarily be in the South and Southwestern states, said a person with knowledge of Farallon's plans, who asked not to be identified because the information is private.
Private equity and hedge-fund firms are increasingly investing in commercial property outside of the largest cities such as New York and Los Angeles, where a rebound in property prices has been strongest. While prices in major markets were 2.5 percent above the pre-crisis peak at the end of the year, in other areas they were 17 percent below the highs in 2007, according to Moody's Investors Service.
"We have recently made several investments in cities with significant job growth and higher barriers to entry, where we are able to purchase properties at a discount to replacement cost," Dan Hirsch, managing member at Farallon, said in the statement. "Some of these investments are burdened with complicated and broken balance sheets."
Farallon has invested more than $3.2 billion in about 130 transactions in income-producing properties over 20 years, according to the statement. The firm's U.S. real estate team is co-headed by Hirsch and Rocky Fried. Steve Bruce, a spokesman for Farallon with ASC Advisors declined to comment beyond the statement.
Hedge-fund firms including Axonic Capital, LibreMax Capital and Saba Capital Management are among firms increasingly delving deeper into commercial property. More than $1 trillion in real-estate debt originated before the property crash comes due over the next three years, leaving a gap the investment firms are aiming to fill through lending to landlords.
Billionaire Steyer, who stepped down from Farallon at the end of 2012 after more than a quarter century, has pledged to spend at least $50 million of his fortune to make climate change an election issue this year. He left Andrew Spokes as the firm's sole managing partner.