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European Focus
Shorenstein Readying $600-700M Fund
By Mark DeCambre - Real Estate Finance & Investment
June 30, 2003 - Shorenstein Company is preparing a $600-750 million investment fund and is considering broadening its investor base to include European pension plans and high-net worth individuals for the first time. The San Francisco-based investment company believes that Europeans continue to maintain a strong appetite for U.S. commercial properties, particularly as the dollar lags against the Euro.
The company maintains strong relationships with European insurers and lenders that have participated in its domestic deals. It is expected to leverage those relationships as it targets European investors. Although Shorenstein has not been directly marketing its funs to Europeans, it has received inquiries from foreign sources as a result of its existing lending sources and deals with foreign investors, a spokesman said. Last year, the company acquired its 450 Lexington Ave. in New York from Royal Dutch/Shell Pension plan.
Shorenstein Investment Partners VII is the company's seventh fund and is expected to maintain the same basic investment strategy of acquiring Class A office properties in major gateway cities in the United States. Capital raising efforts are not anticipated to begin until September and October as a result a firm marketing plan has not been established yet. The size of the fund could increase depending on demand.
The closed-end investment fund will seek internal rates of return in the neighborhood of 20%, using leverage of about 65% to 70%. Shorenstein, which kicked off its first funds more than 10 years ago, has been acquiring real estate since the early 1920s. The company has typically sought to acquire high-end office buildings that have potential upside either in terms of management or leasing. Shorenstein owns over 22 million square feet of office buildings. The majority of the company's investments are in its hometown. Other states in which it holds significant investments include Charlotte, Chicago, Kansas City, Miami, New York, Oakland, Philadelphia, Phoenix, Sacramento and suburban Boston.
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