Madison International Realty Takes a Piece of Sierra Portugal Fund

The real estate-focused liquidity provider has expanded its reach with a minority stake purchase in the prominent shopping center owner and an office acquisition in San Francisco.

By Barbra Murray, Contributing Editor

Ron Dickerman, Madison International Realty
Ron Dickerman, Founder & President, Madison International Realty

Portugal and San Francisco have something in common: they’re both prime markets for Madison International Realty, which recently snapped up assets in both locations. The real estate industry-focused liquidity provider enhanced its office portfolio with the acquisition of an ownership stake in 550 Kearny St. in San Francisco, and added to its European retail holdings with the purchase of a minority interest in the Sierra Portugal Fund.

“Both of these transactions fit well with our direct secondary investment strategy,” Ronald Dickerman, founder & president of Madison International Realty, told Commercial Property Executive. The firm focuses on acquiring partial ownership, joint venture, private REIT and listed shares in Class A properties and portfolios in primary markets, and also provides joint venture equity to owners for monetization purposes.

Madison shelled out $103.7 million to become a co-owner of the 194,000-square-foot office building at 550 Kearny in San Francisco’s Financial District, purchasing an interest from Brickman Real Estate as part of a recapitalization transaction with the real estate private equity firm. The 10-story, LEED-certified tower, built in 1957, is a draw for the TAMI crowd and is presently 95 percent leased.

Madison likes leading markets and San Francisco’s office market certainly fits the bill. The city’s pool of office properties continues to be bolstered by strong tenant demand, and its vacancy rates are dropping rapidly, per a fourth quarter 2015 report by JLL.

550 Kearny St., San Francisco
550 Kearny St., San Francisco (Photo Credit: Terry Forte)

Portugal’s performance in the retail sector is none too shabby either—rising consumer and retailer confidence are sparking a “positive evolution” according to JLL—so Madison’s 25 percent share of the Sierra Portugal Fund fits right into the firm’s portfolio. Launched in 2008, Sierra Portugal Fund owns a collection of nine shopping centers across the southern European country. The group of assets includes 8ª Avenida, AlbufeiraShopping, ArrábidaShopping, GaiaShopping, LeiriaShopping, LoureShopping, Centro Comercial Continente de Portimão, RioSul Shopping and SerraShopping. Each property boasts a coveted location and the distinction of being a top performer in its submarket. And they’re all well leased, with a total average occupancy of more than 96 percent.

Madison purchased the ownership interest from Sonae Sierra, which will continue to hold a 22.5 percent interest in the fund.

Of course, there’s more to come from Madison and logistically, it could come from any premier location in the U.S., the U.K., and Western and Southern Europe. “We will continue to evaluate strategic opportunities in key markets that complement our distinct investment profile,” Dickerman added.