Imagine a combination of an online dating service, stock exchange and social network, just for commercial real estate. David Libman has imagined it, and as founder and CEO, calls it Globerex, a new online global commercial real estate equity exchange. Its purpose is to enable equity investors – be they institutional or individual – to find prospective investments, and for commercial real estate sponsors to find the equity they need, through a seamless suite of cloud-based software applications. The aim is to add liquidity, transparency and centralization to the realm of commercial real estate equity investment, which has traditionally lacked all three, as well as to reach a global community, including European and Asian investors. The site will be accessible from a computer, tablet or smartphone.
Libman sees the New York-based Globerex as a tool that he himself would want to use. A veteran of the multi-family housing industry, Libman had most recently been acquisition director for Fieldstone Properties I LLC, a private investment firm, involved in the purchase of $700 million of commercial real estate, partially financed with institutional equity capital. “It’s always challenging to raise equity,” he said. “Particularly, if you’re below $4 to $5 million.” Typically, he noted, individuals seeking equity have been limited to their own immediate networks. Globerex changes all that and, he said, “I hope it revolutionizes the industry.” He has been working on Globerex for a couple of years and has angel investors backing it.
Right now, there is no charge to sign up. Globerex will seek only investors to join initially, with sponsors following suit this Fall. At some point, investors will pay a member subscription fee, expected to be in the low-thousands of dollars per year to access as many deals as possible. Sponsors are not expected to be charged to subscribe. The exchange will be for principals, although sponsor advisors and investor advisors will be able to subscribe as well. Prospective member profiles and all deals will be verified and approved before they are posted; that process is expected to take one business day.
“People matter as much as property,” Libman said. The verification process is designed to ensure that members are committed and serious real estate professionals.
Globerex will not require pro forma information (projections about investment returns are too subjective, Libman said), although it will include factual data points about a deal. Of utmost importance, is that members will have control over their contact and deal information with no spamming and the assurance that the deals are for real – no “teasers” will be allowed, noted Libman.
Among the site’s features:
- Controlling access to personal, company and sensitive deal information by either allowing open access, restricting access by requiring a signed Non-Disclosure Agreement (NDA) or for maximum privacy, closing access until each interested investor contacts a sponsor directly.
- The ability to transform data points into a one-page presentation that can be downloaded and saved as a print-ready PDF. The ability to track when, how often and which investor has reviewed a deal. A Promote application enables sponsors to proactively send a deal directly to investors.
- Globerex Connections is a commercial real estate niche social network that will enable members to share insights, manage and track communications, centralize documents in their own deal room and share deal presentations with a secure platform.
- A “SmartMatch” feature will enable investors to create detailed investment criteria that will generate reports with all deals that match those criteria. For example, reports could be scheduled for electronic delivery weekly.
Large Investors Drawn to Large Funds
Globerex may be hitting the market at an opportune time, since this year has seen a large flow of institutional capital into private equity real estate funds which will soon be looking to deploy that capital. According to Preqin, a research and analysis firm that tracks the alternative assets industry (including private equity real estate), 18 funds raised a total of $11.2 billion by the end of the second quarter 2011. That’s an increase over the $8.9 billion raised in the first quarter and the $7.1 billion raised in the fourth quarter of 2010. (Fundraising was still below 2006-2007 levels, however.)
The largest private equity real estate fund to close in the second quarter was Lone Star Real Estate Fund II, raising $5.5 billion. Preqin, founded in 2002, reported that there are currently 435 private equity real estate funds in the market, targeting a total of $138 billion. The company calls the market “very overcrowded.”
In the second quarter, the funds that raised the most capital are those whose primary focus is on North America; 10 of these funds received total commitments of $8.6 billion. Among them: Och-Ziff Real Estate Fund II, with $840 million raised to invest in debt and distressed property in the U.S.; Harrison Street Real Estate Partners III, with $596 million for opportunistic investments; and Garrison Real Estate Fund II, with $575 million to invest in debt and distressed property in the U.S.
During the second quarter of the year, Preqin conducted a survey of more than 70 alternative investment consultants and found that just over two-thirds of the private real estate consultants believe that North America will present the best investment opportunities over the coming 12
months. Preqin also reported that the investment consultants and their private real estate investor clients were looking to commit greater amounts of capital over the course of 2011 than in the previous year, particularly targeting opportunistic and distressed strategies in North America and Asia. Concerns remain, however, mainly about market valuations and possible volatility in the market.
For a longer-term perspective, Preqin has also determined the top 10 private real estate equity funds and how much they have raised over the past 10 years. They are:
- Blackstone Group, $30.1 billion
- Morgan Stanley Real Estate, $23 billion
- Fortress Investment Group, $21.2 billion
- Goldman Sachs Merchant Banking Division, $19.7 billion
- Lone Star Funds, $19.2 billion
- Carlyle Group, $10.8 billion
- Brookfield Asset Management, $10.7 billion
- Colony Capital, $10.6 billion
- LaSalle Investment Management, $10.6 billion
- Beacon Capital Partners, $10.2 billion
Preqin noted that 41 percent of all U.S. public pension funds that invest in private equity real estate have invested with at least one of the top 10 firms. Blackstone Group, Morgan Stanley Real Estate and LaSalle Investment Management have each secured commitments from more than 35 different U.S. public pension funds. Ten of the most significant U.S. public pension funds that invest in private real estate vehicles have committed to funds managed by at least three of the top 10 managers.
CalSTRS has committed to more individual funds managed by the top 10 managers than any other U.S. public pension fund. The commitment is in six funds managed by Beacon Capital Partners; nine operated by Fortress Investment Group; five raised by Lone Star Funds; six Morgan Stanley Real
Estate’s vehicles; and one Colony Capital fund. The $236.6 billion California Public Employees’ Retirement System (CalPERS) and the $153 billion CalSTRS each have approximately $17.8 billion allocated to real estate, making them the largest U.S. pension funds in real estate.
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