By Jon Peterson
Chicago-based Pearlmark Real Estate is planning on seeking out investment opportunities in San Francisco and Seattle for its latest commingled fund, Pearlmark Mezzanine Realty Partners IV.
“San Francisco is a market that we have been active in this year, and we hope to continue that going forward. We are now looking at a transaction in Seattle for our current investment fund and hope to close it at some point in the future,” says Douglas Lyons, managing principal and head of debt investments for Pearlmark.[contextly_sidebar id=”ZLTWO2vfFAQ3zTLnUwIGJkfhXNnRBO8c”]Overall, the investment manager will be investing capital for Partners IV in the top 20 major metropolitan markets on a nationwide basis. The company just had its first closing for the commingled fund with a $50 million raise. The goal for the fund is to have a final closing later this year or in early 2016 with a total capital raise somewhere between $300 million and $500 million.
Pearlmark has been active in the greater San Francisco Bay Area this year. It’s most recent deal was providing a $48.5 million mezzanine construction loan on the Moffett Gateway office development in Sunnyvale being developed by San Francisco-based Jay Paul Company. This is a three-building project totaling 612,691 square feet. This investment was done on behalf of a separate account institutional client.
Pearlmark was also part of a three-company venture in Santa Clara that paid around $150 per square foot or $19 million to buy the 127,000 square foot 5301 Patrick Henry Drive office/R&D facility in Santa Clara. The other companies involved in the deal were Chicago-based Kinship Capital and San Mateo-based Insight Realty Company in a deal that closed in January. Some of its other Bay Area clients have been Harvest Properties and Lowe Enterprises.
Pearlmark will be using a variety of investment structures on its transactions for Partners IV. These will include mezzanine loans, the subordinate interests of A/B structured loans, preferred equity and whole loans including bridge financing. There will be no leverage placed on the commingled fund.
Pearlmark will be looking at investing in a variety of property types. These would include the traditional ones like office buildings and industrial properties, as well as deals done with specialized property types like medical office buildings. Most of the deals for the commingled fund will be investing somewhere in the range of $10 million to $20 million and include a mixture of existing properties and some new development transactions.
Pearlmark is now 50 percent owned by Philadelphia-based Resource America. This company has made a $50 million co-investment into Partners IV. “This co-investment will be split with $25 million invested in the first close and another $25 million when the entire capital raise is completed,” said Lyons.
The targeted returns for Partners IV is 10 percent to 12 percent net IRRs over a three- to five-year investment holding period. Investors in the commingled fund will be a mixture of pension funds, institutional investor and high net-worth investors.
Resource America is a specialty finance company. It manages a portfolio with a gross asset value of $19 billion. This company acquired its interest in Pearlmark last December.