Hillwood, Sovereign Wealth Fund Wrap First Closing of $1B Industrial Venture

The partners expect to ultimately raise an aggregate $400 million, which they intend to leverage for $1 billion in acquisitions and development over the next three to four years.

Hillwood and a major sovereign wealth fund have completed the initial closing of a new fund with more than $200 million in commitments for investment in industrial real estate across North America. The partners expect to ultimately raise an aggregate $400 million, which they intend to leverage for $1 billion in acquisitions and development over the next three to four years.

Hillwood’s partnership with the unidentified sovereign wealth fund reflects the current investment market dynamics. “It’s really the confluence of two major trends—a  significant influx of foreign capital into the United States and the shifting of capital flows into higher yielding property sectors, such as industrial,” Dan Fasulo, managing director with Real Capital Analytics Inc., told CPE.

The fund caught the attention of pensions and sovereign wealth funds in the first round. Hillwood, charged with overseeing acquisitions, developments and joint ventures, is eyeing January for the fund’s first buy. Large warehouse properties are the fund’s main target.

“Logistics space is undergoing changes and modernization, which creates opportunities in the warehouse space,” a Hillwood spokesperson told CPE. “Distribution warehouses are Hillwood’s expertise and have historically provided attractive risk-adjusted returns.”

While all of North America will be the fund’s playground, Hillwood will focus on larger markets in the Northeast and Southern California, plus the Atlanta, Dallas and Memphis metropolitan areas.

Hillwood and its partner have joined forces on a similar venture in the past. It’s the type of union that is on the rise in the United States. According to the Sovereign Wealth Fund Institute, in estimated $500 billion to $600 billion is allocated to real estate worldwide by wealth funds. “In terms of U.S. real estate, it’s a very hot market because the U.S. has great property rights, and that’s very important. U.S. markets are very transparent compared to other property markets and there’s a lot of opportunity to purchase, co-invest or participate in funds to invest in assets,” Michael Maduell, SWFI told CPE.