As the world moves increasingly online, institutional investors are gravitating to e-commerce investments — but that doesn’t mean there’s less demand for real estate.
ElmTree Funds, a real estate private equity manager, on Wednesday is expected to announce the closure of its largest commingled fund to date. The fund — named “Fund IV” — will target investments in industrial and logistical assets.
“The interest and appetite for industrial products is probably the highest demand ever,” Jim Koman, ElmTree’s chief executive officer, told Institutional Investor. “That was a big part of the fundraising interest we had from a number of different groups, and I think that appetite is going to continue.”
The Covid-19 pandemic furthered the transition to a predominantly digital world, which, in turn, created demand for leased space: “Companies are out there leasing space right now at record levels to handle this larger increase in e-commerce sales,” Koman said.
On the supply chain side, more people are interested in on-shoring and bring industry back into the U.S., Koman said — another trend that spurred fundraising. Elmtree’s Fund IV exceeded its original $800 million cap, raising just under $900 of commitments.
“We’re looking to acquire more and more of the industrial products,” Koman said. “The investors have this insatiable appetite.”
According to Koman, ElmTree is just getting started. He said the firm is on pace to do another $3 billion-worth of acquisitions in the next year, a prediction that is consistent with its expansion over the past year. In the past 12 months, ElmTree has acquired 47 properties and deployed around $4 billion worth of capital.
“There’s a number of different trends we’re watching at all times on how to increase our size,” Koman said. “But I think anything that we would do would all revolve around net lease.”