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Liquid Realty halts fundraising

The San Francisco-based firm, which once raised the largest-ever real estate secondaries fund, has ceased efforts to market its fifth vehicle as it considers options for a shift in strategy.

Liquid Realty Partners has put fundraising on hold for its latest vehicle, the $800 million Liquid Realty Partners (LRP) V, according to sources familiar with the matter. PERE understands that the San Francisco-based fund manager has informed several investors that it has stopped marketing the vehicle and currently is exploring a number of options, including a potential change in focus. Liquid is expected to announce any decision regarding its strategy later this year.

Liquid Realty launched LRP V in 2010 and, with an $800 million target, it would have been the largest dedicated real estate secondaries fund ever raised. To date, however, the vehicle has not held a close on any substantial amount of capital from investors. Scott Landress, chief executive of Liquid Realty, declined to comment on any potential strategic shift or the firm’s fundraising activities.

Like many fund managers, Liquid Realty has had difficulty attracting capital in a tough fundraising environment – a stark reversal from the days before the financial crisis. Founded in 2001 by Landress and Mark Berman, the firm closed on $720 million in 2006 for its third global fund, LRP III, the largest-ever fundraising for a real estate secondaries vehicle. One year later, the firm followed up with a $570 million capital-raise for LRP IV, exceeding the vehicle’s original $400 million target by more than 43 percent. More than 70 percent of the limited partners in LRP IV previously had invested in LRP III.

Since then, however, Liquid Realty has struggled in the wake of several key departures, including Berman in 2005 and director of business development Josh Cleveland and director of acquisitions Brendan McDonald in 2009. In October 2009, chief investment officer Jeff Giller left after more than four years at the firm, triggering a key-man clause in LRP IV.

More recent personnel exits include Tracey Luke, director of portfolio management, who left earlier this year to join Invesco Real Estate in a similar role. The steady flow of departures hasn’t helped Liquid Realty with its recent capital-raising efforts, as many investors have been upset by the high level of turnover, multiple sources have said.

In 2010, Giller and McDonald went on to launch Clairvue Capital Partners with the backing of Goldman Sachs’ private equity group, focusing on fund, asset and investor recapitalisations. Cleveland re-united with his former colleagues last year, joining Clairvue as a partner in the firm’s New York office.

Other competitors, such as Landmark Partners, Madison International Realty and Partners Group, also have taken away market share from Liquid Realty. Last year, Landmark Real Estate Fund VI closed on $718 million in equity commitments, the largest real estate secondaries fundraise since the financial crisis.