Landmark: RE secondaries up 20% on heels of Harvard transaction

Dollar volume climbed $1bn year-on-year as endowments reduced their legacy fund portfolios and fund sponsors continued to recapitalise funds and partnerships.

Real estate secondaries dollar volume jumped 20 percent from 2016 to 2017, hitting $6 billion last year, according to a report from secondaries firm Landmark Partners released Monday.

The firm counted 108 secondaries deals that closed or went under contract in 2017, up 10 percent year-on-year.

Endowments comprised the bulk of 2017 sellers, accounting for 46 percent of total transaction volume. Harvard Management Company led its peers, selling almost $2 billion of real estate assets to Landmark and Carlyle’s Metropolitan Real Estate, sister title PERE reported in August. The value of Landmark’s deal was around $1.6 billion. HMC’s exited portfolio consisted of at least 50 fund stakes diversified by strategy, regional focus and vintage, sources said at the time. The endowment’s move to divest was reportedly driven by Rick Slocum, who took up the newly-created post of chief investment officer in March.

Fund sponsors, funds of funds and other asset managers drove 23 percent of transaction volume last year. Banks, by contrast, barely registered in last year’s activity count, comprising less than 1 percent of the volume.

“Banks were steady sellers of private real estate exposure post global financial crisis through the end of 2016 and many have successfully liquidated a significant component of their private fund holdings,” the report noted. “As a result, we anticipate more episodic selling by banks going forward.”

Real estate secondaries deals in 2017 included the State of Wisconsin Investment Board’s purchase of stakes in eight vehicles for $231 million; Dallas Police & Fire Pension’s sale of nine stakes for $70 million and the $950 million recapitalisation agreement inked in May by China Life Insurance Group with St. Louis, Missouri-based ElmTree Funds. Such recapitalisations are becoming more attractive, with advisory services firm JLL estimating that volumes rose 80 percent year-on-year.