Real Estate in Texas Real Estate in Texas

REAL ESTATE IN TEXAS REAL ESTATE IN TEXAS

The real estate market in Texas is one of the largest in the US both for institutional investors and fund managers. Here, we take a look at the opportunities available to fund managers, the fundraising activity of firms and Texas-based investors’ appetite for the asset class.

Texas-Based Private Real Estate Fund Managers and Institutional Investors: KEY FACTS

257 Texas ranks third among US states in terms of the number REST OF TEXAS of fund managers. 2 FUND MANAGERS DALLAS-FORT 34 21  WORTH-ARLINGTON Texas-based funds in market INVESTORS 147 targeting $9.2bn. FUND MANAGERS TEXAS 70 INVESTORS 168 Texas ranks fifth among US  AUSTIN states in terms of the number HOUSTON of institutional investors. SAN ANTONIO  40 FUND 58 10 MANAGERS FUND FUND MANAGERS MANAGERS 21 INVESTORS 45 11 INVESTORS 7.1% INVESTORS Average current allocation to private real estate among Texas-based institutional investors.

Fig. 1: Largest Texas-Based Fund Managers by Aggregate Capital Raised for Closed-End Real Estate Funds in the Last 10 Years Firm Headquarters Capital Raised in Last 10 Years ($bn) Dry Powder ($bn) Lone Star Funds Dallas 56.6 9.8 Crow Holdings Capital – Real Estate Dallas 5.4 1.3 TPG Real Estate Fort Worth 2.1 0.6 Hines Houston 1.9 1.2 Pennybacker Capital Austin 0.9 0.4

Source: Preqin

Fig. 2: Largest Texas-Based Investors by Current Allocation to Real Estate Current Allocation Investor Location Type AUM ($bn) Geographic Preferences to Real Estate ($bn) Teacher Retirement System of Texas Austin Public Pension Fund 146 17.8 North America United Services Automobile Association San Antonio Insurance Company 147 3.0 Global, OECD (USAA) Employees' Retirement System of Texas Austin Public Pension Fund 28 2.6 North America Texas Permanent School Fund State Austin Sovereign Wealth Fund 33 2.4 North America, Europe Board of Education Texas Municipal Retirement System Austin Public Pension Fund 27 2.2 Global, OECD

Source: Preqin

Fig. 3: Annual Texas-Based Closed-End Private Real Estate Fig. 4: Texas-Based Closed-End Private Real Estate Fundraising Fundraising, 2006 - 2018 YTD (As at March 2018) by Primary Strategy, 2015 - 2018 YTD (As at March 2018)

20 100% 1 18 18 17 17 90% 5.6 16 15 10 13.5 80% 13.8 14.0 14 Distressed 14 13 13 12 12 12 70% 12 10.8 11.0 Opportunistic 10 10 9.4 60% Value Added 8 50% 14.5 23 Core-Plus 6 40% 4.2 4 4 3.5 Core 2.2 Proportion of Total 30% 2 1.6 1 0.4 0.4 0.5 20% Debt 0 5.8 10% 2 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2 0.1 YTD 0% 2 0.4 0.1 Year of Final Close No. of Funds Closed Aggregate Capital Raised No. of Funds Closed Aggregate Capital Raised ($bn) ($bn)

Source: Preqin Source: Preqin

Fig. 5: Largest Texas-Based Closed-End Private Real Estate Funds in Market (As at March 2018) Geographic Primary Property Fund Firm Target Size (mn) Strategies Focus Focus Opportunistic, TPG Real Estate Fund III TPG Real Estate 3,000 USD US Residential Value Added Crow Holdings Capital Core-Plus, Crow Holdings Realty Partners VIII 1,500 USD US Diversified – Real Estate Value Added Core-Plus, Hines European Value Fund Hines 500 EUR Europe Diversified Value Added Century Bridge China Real Estate Fund II Century Bridge Capital 400 USD Opportunistic China Residential Transwestern TSP Value & Income Fund II 350 USD Value Added US Diversified Investment Group Epic Real Estate Epic Real Estate Partners II 300 USD Value Added North America Retail Partners Stonelake Capital Stonelake Opportunity Partners V 300 USD Debt, Opportunistic US Diversified Partners CapRidge Partners Value Fund III CapRidge Partners 250 USD Value Added US Diversified Crow Holdings Capital Crow Holdings Self-Storage Fund 250 USD Value Added North America Niche – Real Estate Opportunistic, MedProperties Fund III MedProperties 250 USD US Niche Value Added

Source: Preqin

Fig. 6: PERE Deals Completed in Texas, 2011 - 2018 YTD Fig, 7: PERE Deals Completed in Texas as a Proportion of All US (As at March 2018) PERE Deals, 2011 - 2018 YTD (As at March 2018) 400 12 14% 359 13% 350 334 320 321 Aggregate Deal Value ($bn) 12% 11% 11% 307 10 300 10% 10% 9% 8 9% 9% 250 235 8% 8% 8% 200 6 6% 167 6% 6% 5%

No. of Deals 150 4 4% 4%

Proportion of Total 4% 100 3% 50 2 50 2% 1%

0 0 0% 2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018 YTD YTD No. of Deals Aggregate Deal Value ($bn) No. of Deals Aggregate Deal Value

Source: Preqin Source: Preqin

Fig. 8: PERE Deals Completed in Texas by Asset Type, 2011 - 2018 YTD (As at March 2018) Fig. 9: Institutional Investors in Real Estate by Type 100% 2% 3% 100% Niche 1% 1% 2% 2% 2% 1% Other 90% 90% 4% 4% Bank/Investment Bank Mixed Use 11% 80% 80% 16% Asset Manager 70% Land 14% 70% 9% Investment Company 60% 60% 9% Insurance Company Hotel 14% 50% 50% Endowment Plan Retail 16% 40% 40% 16% Wealth Manager Industrial Family Office

Proportion of Deals 30% 30% 16% Proportion of Investors 16% Public Pension Fund 20% Office 20% 23% Private Sector Pension Fund 10% 10% 17% Residential Foundation 0% 0% 2011 2012 2013 2014 2015 2016 2017 2018 Texas-Based Rest of US-Based YTD Investors Investors Source: Preqin Source: Preqin

Fig. 10: Five Largest Single-Asset PERE Deals Completed in Texas, 2017 - 2018 YTD (As at March 2018) Primary Asset Deal Size Asset Buyer(s) Seller(s) Location Date Type (mn) Goldman Sachs Sheraton Dallas Hotel Hotel Chartres Lodging Group Merchant Banking 218 USD Dallas Jun-17 Division Marathon Oil Tower Office Hertz Investment Group CBRE Global Investors 195 USD Houston Jun-17 Rainier Companies, The Moore Plaza Retail Unidentified Seller/s 192 USD Corpus Christi Feb-18 Continuum Company Woodbranch Helios Plaza Office Invesco Real Estate 175 USD Houston Sep-17 Investments Corp.

American Realty Advisors, The Village at Allen Retail DLC Management PGIM Real Estate 170 USD Allen Dec-17 Corporation

Source: Preqin

Fig. 11: Five Largest PERE Portfolio Deals with Exposure to Texas, 2017 - 2018 YTD (As at March 2018) Primary Asset Deal Size No. of Asset Buyer(s) Seller(s) Location Date Type (mn) Assets Brookfield Property JP Morgan Asset Houston Center Office 875 USD 4 Houston Sep-17 Group Management Ann Arbor, O'Connor Capital Unidentified Austin, Malibu, US, Shopping Center Portfolio Retail Partners, Washington 600 USD 7 May-17 Seller/s McAllen, Prime Group Oklahoma City CPP Investment Board, Silverpeak Houston, TX, Office Portfolio Office Parkway 512 USD 2 Houston Feb-17 Real Estate Partners, TH Real Estate Gurnee, Katy, US, Multi-family Portfolio Residential Blackstone Group TA Realty 430 USD 6 Lenexa, Palm Apr-17 Beach Gardens Brandywine Starwood Capital Austin, TX, Office Portfolio Office Realty Trust, DRA 360 USD 5 Austin Sep-17 Group Advisors

Source: Preqin

Fig. 12: Strategy Preferences of Institutional Investors in Fig. 13: Geographic Preferences of Institutional Investors in Real Estate Real Estate 80% 99% 72% 100% 97% 70% 66% 62% 90% 60% 56% 55% 53% 80% 50% 70% 38% 38% 40% 60% 31% 30% 30% 28% 24% 50% 19% 18% 41% 20% 40% 36% 34% 33% Proportion of Investors 10% 31% 29% 4% 5% 30% 26% 21%

0% Proportion of Investors 20% 10% Core Debt 0% Core-Plus

Distressed North Europe Asia Emerging Global Secondaries Value Added

Opportunistic America Markets Fund of Funds Texas-Based Investors Rest of US-Based Investors Texas-Based Investors Rest of US-Based Investors

Source: Preqin Source: Preqin

Fig. 14: Sample Active Texas-Based Investors in Real Estate Investor Type Location Plans for Next 12 Months Will invest $100mn in core private real estate funds Texas Christian University Endowment Endowment Plan Fort Worth with global exposure. Looking to commit to in one or two private real estate GuideStone Financial Resources Asset Manager Dallas funds on an opportunistic basis. Plans to invest in the asset class on a continuous Public Pension Employees' Retirement System of Texas Austin basis as it looks to reach its 12% target allocation to Fund real estate.

Source: Preqin

DISCOVER THE LATEST TEXAS REAL ESTATE DATA

Preqin’s online platform has helped thousands of real estate professionals raise capital and identify investment opportunities. Constantly updated by a team of dedicated analysts, this comprehensive resource provides the most up-to-date information on the private real estate industry, including:

■ Funds in market: view detailed profiles for 34 Texas-based and 377 US-based real estate funds currently raising capital ■ Historical fundraising: 246 Texas-based and 3,231 US-based funds closed previously ■ Investors: view detailed profiles for 168 Texas-based and 3,023 US-based investors, including investment preferences and future plans ■ Performance: 93 Texas-based and 1,430 US-based funds with performance data ■ Deals: 3,666 Texas-based and 37,940 US-based real estate deals and much more.

For more information about how Preqin’s data can help you or to arrange a demonstration, please visit: www.preqin.com/realestate