London-headquartered asset manager Pantheon believes the real estate secondaries market presents a $10 billion annual investing opportunity.
With that market’s growth in mind, the firm has chosen secondaries as its initial focus area for its entry into real estate investing.
The firm, which has $65.9 billion in assets under management across different alternative sectors, has announced its expansion into the real estate asset class. The new strategy, as the firm pointed out in a press release, will be developed as an extension of its global infrastructure and real assets platform that manages $15.8 billion in assets.
It has brought on board two senior executives, Roman Braslavsky and David Elliott, to establish the New York-based platform. Braslavsky has been appointed partner and head of Pantheon Real Estate, while Elliott will be a managing director. Both previously worked at GI Partners, a San Francisco-based middle-market investment firm.
“We believe this strategy will benefit from a strong and growing opportunity set, as well as compelling synergies with Pantheon’s infrastructure and real assets platform and our broader experience in secondaries,” said Kathryn Leaf, partner in the firm’s global infrastructure and real assets team and chair of its investment committee.
The secondaries market has been rapidly growing in prominence over the last few years, with at least 70 dedicated private equity secondaries funds in the market targeting an aggregate $84 billion, as Secondaries Investor reported this week. The majority of these funds are focused on private equity secondaries and only two have a real estate mandate, including the 2019-vintage $2 billion Partners Group Real Estate Opportunities 2019 fund.
Pantheon has been an active investor in GP-led deals across private equity, infrastructure and real assets, with $7.6 billion committed to such secondaries transactions as of June 2021. Braslavsky said in the announcement that there is “growing demand to provide strategic capital solutions on GP-led transactions and to investors seeking to monetize or restructure select investment positions” within real estate, because of demographic shifts, technological advances and the disruptions caused by the pandemic.
The broader real estate sector has indeed been under the spotlight since the outbreak of the pandemic, with a growing number of managers announcing forays into the asset class – through M&As and take-private transactions – to capitalize on the opportunities created from the market dislocation as well as the low interest rate environment.
In October, for example, global manager PineBridge Investments agreed to acquire UK-based private equity real estate fund manager Benson Elliot Capital Management. The acquisition gave PineBridge control over $3.5 billion of equity across a portfolio comprising of retail, hotel, office and residential assets in Europe. More recently, Bridgepoint, owner of PERE publisher PEI Media, also revealed its interest in investing in real estate, including real estate debt, on the back of its decision to go public on the London Stock Exchange.