Landmark draws second blood

With its $3.3 billion record fundraising, Landmark Partners has prised private real estate secondaries’ dominant position away from its long-time rival Partners Group. “I should think Landmark are really quite happy about having raised the largest real estate secondaries fund ever, in more ways than one,” one advisor in the space told us.

For years, the Connecticut-based firm trailed its opponent on the fundraising circuit, always raising big but not bigger vehicles for the strategy of buying positions in private real estate vehicles. The $1.6 billion collected for Landmark Real Estate fund VII in April 2015, for instance, was still in the shadow of Partners’ $1.95 billion raise for its last fund, Partners Group Real Estate Secondary 2013. But while Partners is yet to formally close follow-up Secondary 2017, the vehicle’s stated target of $2.3 billion suggests second blood in this particular battle will be drawn by Landmark.

And so, having raised 106 percent more capital for Landmark Real Estate Fund VIII, Francisco Borges, Landmark’s chairman and managing partner, is in suitably gloating mood, declaring in the firm’s announcement on the closing: “Our dedicated real estate team, coupled with commitments from over 150 investors globally, positions Landmark as the leader in the real estate secondary market.”

Marc Weiss, Partners’ head of real estate, was similarly gleeful at the closing of Secondary 2013. Declaring the sector as “coming of age”, he said: “We are the market leader in the field of real estate secondaries.”

In reality, the Landmark-Partners tussle may well be predominantly confined to the capital markets, not the transactional space. Landmark has been most active in the traditional secondaries segment of this universe. It has captured some of the largest portfolios of closed-end fund positions, including the $1.6 billion purchase of a portfolio from Harvard’s endowment last August. Partners, meanwhile, has increasingly engaged in smaller-scale portfolio restructurings, such as its $265 million equity injection into a portfolio of seven retail, mixed-used and development assets in the US managed by Madison Marquette in 2016.

Partners is commanding just as many headlines for acquiring assets directly, like the $1 billion of offices it purchased stateside in December, the A$205 million ($160 million; €129 million) purchase of 73 Miller Street, an office in Sydney in the same month, or the €170 million CB16 office tower in La Défense, Paris, it bought in August.

Partners talks these days about its ‘one-team’ approach, where its secondaries and direct teams pool resources to get deals done. While secondaries classification is becoming more of an art form than a science, it would be a stretch to describe some of its deals as secondaries. Landmark tracked 108 real estate secondaries transactions, reflecting some $6 billion of deals, last year in its well-regarded annual volumes research and it would be a fair assumption that just a fraction of Partners’ deals qualified for the research.

Of course, that is probably a good thing given Landmark has raised 50 percent of that number in equity for LREF VIII. The firm might well have landed a sucker punch on its rival on the fundraising front. But even accounting for all the late-stage primaries, stapled secondaries deals and other forms of sort-of-secondaries out there, it might be for the best that Partners is scrapping on other fronts (these days anyway). Of course, whether or not the Swiss manager has conceded the lead on pure private real estate secondaries will be evident in the quotations that accompany the final closing of Secondary 2017. We, for one, will be reading that announcement with interest.