Harrison Street Closes $2.5B Fund

By Barbra Murray, Contributing Editor

Chris Merrill, of Harrison Street

Harrison Street Real Estate Capital L.L.C. originally set its sights on raising $650 million in equity capital for Harrison Street Real Estate Partners IV L.P., and the private equity firm has achieved that goal–and handily surpassed it. Harrison Street just wrapped up the final closing of its fourth opportunistic fund, having reached its designated hard cap of $750 million, a figure representing purchasing power of more than $2.5 billion.

To put it mildly, there was significant interest in Fund IV. Harrison Street completed the first closing of the investment vehicle in February with a whopping $465 million in equity capital, or 75 percent of the original target amount. And the group of investors was diverse, consisting of public pension funds, corporate pension plans, endowments, foundations, insurance companies and family offices.

Like all Harrison Street funds, Fund IV engages in the acquisition and development of need-based real estate in the education, healthcare and storage sectors. The fund’s current commitments and closed transactions total approximately $225 million.

“Investor interest in our targeted sectors continues to grow given the performance of these asset classes versus traditional property types,” Christopher Merrill, co-founder, president & CEO of Harrison Street, told Commercial Property Executive. “However it still remains difficult for investors to access these sectors given the fragmentation in the market. Tenant demand is getting stronger every day for our  asset classes, particularly student housing, given the increased number of kids going to college, staying in college longer, lack of capital from universities to build housing.” Fund IV investments in student housing include the acquisition of a property serving Baylor University in Texas, and the development of projects near Indiana University, the University of Wisconsin and Oregon State University.

“For our healthcare strategy, with people living longer there is increased demand for assisted/memory care properties and medical office,” Merrill added.

Fund IV’s activities in the healthcare property market include the development of assisted living communities in affluent Houston submarkets; the purchase of dedicated memory care facilities in Dallas and Chicago; the acquisition of inpatient rehabilitation facilities in Boston; and the purchase of a medical office building in The Woodlands, Texas, just outside of Houston.

“All of this is strengthened by the lack of supply given the difficultly in capital-raising,” he said.

Harrison Street closed its previous fund, Harrison Street Real Estate Partners III L.P., in June 2011, with $595 million in commitments for a leveraged total of approximately $2 billion.  Of course, there’s more on the horizon. As Merrill concluded, “We will launch Fund V once we finish deploying the capital for Fund IV.”