Clairmont Raises $110M for GP Co-Investment Real Estate Fund

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Investor appetite for unusual strategies to capture profits from real estate investments remains strong amid rising inflation and market turmoil.

Clairmont Capital Group, a Los Angeles-based real estate private equity firm, is looking to capitalize on that interest. The asset manager is seeking to raise $150 million for its fourth GP co-investment fund, according to Macklin Turnrose, director of investor relations at the firm.

Clairmont has already held a first close of the fund at $110 million, Turnrose said, adding that the vehicle is expected to exceed its target and reach its cap of $200 million. Clairmont hopes to raise funds from LPs, including institutionalized IRAs, family offices, small pension funds and insurers, as well as high net worth individuals.

One of the top investors in the fund, which has committed $50 million to the vehicle, is an institutional IRA that manages about $20 billion in assets.

The new vehicle targets GP co-investment – ​​rather than traditional real estate investment in real estate joint ventures – and funds the capital that a general partner is required to bring into joint venture real estate transactions. In exchange, the fund earns a percentage of promotional distributions – the share of investment profits that a GP pockets after the LPs get their profits. In the non-real estate world, a promotion is known as deferred interest.

Here is an example of how this GP co-investment mechanism works.

Suppose there is a $200 million real estate development project, which is capitalized by 60% debt ($120 million) and 40% equity investment ($80 million). In a GP/LP JV deal, the LPs will typically put in place the majority of equity investments, say 90%, leaving the GP on the hook for the remaining 10%.

A GP co-investment fund will contribute a portion of that 10% in return for part of the promotion, allowing the GP to free up its capital for more deals and to expand its operations, rather than investing heavily in each transaction.

Other firms that manage similar funds include real estate investors DVO Real Estate and Accord Group Holdings, according to data from PitchBook.

Clairmont’s Fund IV will build a portfolio of 60 to 75 assets, with investments of $3 million to $5 million per transaction, Turnrose said. It will focus on the US market, targeting real estate assets such as multi-family and single-family rental properties, student housing and industrial logistics. The company has a portfolio of deals worth $150 million and aims to deploy its capital over the next 24 months, earlier than the fund’s 36-month investment period.

Clairmont’s GP partnerships include CA Ventures, The Habitat Company and The Preiss Company, according to marketing documents viewed by PitchBook.

Real estate assets tend to attract investors especially in times of inflation, as the asset class is seen by many as an inflation hedge. KKR and GreenPoint Partners are recent investors reportedly marketing new vehicles targeting real estate betting.

Featured image by ferrantraite/Getty Images

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