Bain Capital has raised $1.5 billion for its real estate fund, far exceeding its original target of $1 billion.
One of the biggest backers of the debut fund is the endowment of Harvard University, which is worth $39 billion and typically focuses on areas such as laboratories, senior housing, and self-storage facilities. The Los Angeles County Employees Retirement Association committed $100 million to the fund earlier this year, and Bain contributed more than $150 million.
“The scale of the fund was established consciously to reflect a sensible level of capital for this strategy and where we are in the market,” Daniel Cummings, a managing director and head of the real estate team, told Bloomberg.
Bain has already invested around $550 million from the fund, and plans to go into about a dozen joint ventures with experts in various property segments as it continues to dole out the capital. Leverage on acquisitions can run as high as 65%.
In 2018, Bain hired the team from Harvard’s endowment (including Cummings). That officially marked its break into real estate, although it did previously have some exposure throughout its portfolio. At the time, Bain took over $3.4 billion of real estate assets from the endowment, which was downsizing operations and outsourcing much of its asset management. Real estate was the best-performing asset class for Harvard’s endowment for years, and Cummings was the university’s highest-paid employee in 2016, making $23.8 million. The team has been expanding, and plans on using the same strategy that’s brought them success in the past.
Bain has also been liquidating properties from the portfolio that it manages for Harvard. Last year it sold more than 100 warehouses in the southeastern U.S. to Blackstone for about $950 million. The university paid around $560 million for most of the properties beginning in 2014. Bain also sole a life sciences building in Cambridge Massachusetts this spring for $128 million. The team has invested in more than 3 million square feet of life sciences and lab space, making it one of the biggest players in the sector.
Assets in private equity real estate funds surpassed $900 billion in 2018, in spite of mounting worry about escalating property prices. Much of the growth has been due to an increasing number of acquisitions; existing private equity firms are raising more and more capital for massive funds to buy assets all around the world. A similar phenomenon is happening with commercial real estate brokerages, as real estate investors who are overseeing larger and larger pools of money are having to spread that capital around the world, as it’s too large of an investment to put all of it into a single place. They need to work with companies with a large, international presence.
Bain was co-founded by Mitt Romney in 1984, and manages around $105 billion.