Harrison Street, an investment firm that buys and sells education, health-care and storage properties, raised $1.3 billion for its seventh U.S. opportunistic real estate fund.
The firm exceeded its original $950 million target for the fund and raised an additional $302.5 million in co-investment vehicles, lifting its expected buying capacity to about $4 billion including debt, Chief Executive Officer Christopher Merrill said in an interview.
“Our focus is on critical, needs-based real estate that’s tied to demographics such as the aging population, college enrollments and a more mobile population,” Merrill said. He described Harrison Street’s strategy as “non-momentum investing” that’s resilient in downturns and able to outperform traditional property sectors. Net operating income rose 7.4% at student-housing real estate investment trusts and 5.3% at health-care REITs during the last recession amid NOI declines at retail, office and apartment REITs, according to Harrison Street.
Merrill said he expects more than half the fund’s exposure to be comprised of senior-housing, life-science and medical-office investments. Already, the fund has invested in the development of a community with 180 independent-living, assisted-living and memory-care units in San Diego, California. The population of people 75 or older within a five-mile radius of the community is expected to climb 25% through 2023.
The fund also acquired a fully leased life-science facility and agreed to develop another in West Cambridge, Massachusetts, where the firm has previously invested. Its tenants in the wider Cambridge area include Pfizer Inc., Novartis International AG and LabCentral.
The fund’s institutional investors include the Teacher Retirement System of Texas and the Texas County & District Retirement System, according to data compiled by Bloomberg. Existing investors contributed 65% of the total committed capital to the fund, known as Harrison Street Real Estate Partners VII LP.
Founded in 2005, Chicago-based Harrison Street has about $21.5 billion under management and invests across the U.S. and Europe. It sold a 75% stake in itself to Allen Multifamily Team last July. Harrison Street’s owners, including Colliers, invested about $20 million in its newest fund.
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Harrison Street’s fundraising comes amid a dip in overall private real estate investing in the quarter ended June 30, according to data provider Preqin. Opportunistic funds raised $10 billion of a combined $29 billion in the second quarter, which was a decline from $46 billion in the previous three months.