(Bloomberg)—RXR Realty is seeking $1 billion for a vehicle dedicated to making bets on real estate with the expectation that valuations may tumble as a result of the Covid-19 pandemic, according to a person with knowledge of the matter.
The firm is discussing the RXR Real Estate Market Dislocation & Mega-Trends Fund with potential investors, said the person, who requested anonymity because the talks aren’t public. RXR plans to find “pockets of distress” such as non-performing debt and opportunities for rescue financing. It’ll focus on logistics, telehealth and residential wagers -- areas of the property market that the firm believes will thrive in a post-Covid 19 world, a presentation reviewed by Bloomberg News shows.
The pandemic may have permanently altered the way companies and consumers use real estate, according to the presentation. RXR foresees demand for transit-linked suburban downtown areas and conversion of obsolete buildings including hotels and malls into multifamily, industrial or film-studio properties. The firm has forecast underperformance for office properties in 2021 and 2022, before a rebound begins in 2023.
RXR’s new fund will target levered returns after fees between 12% and 16%. Institutional investors can co-invest additional capital alongside the fund, which would reduce the overall management fee that they pay, the presentation shows. An RXR representative declined to comment.
The vehicle -- like its predecessors -- will primarily focus on New York City and its surroundings, and has identified potential office and multifamily wagers in Manhattan as well as residential developments in Long Island and Westchester. The fund can make investments in other cities including Boston and Washington, D.C.
New York-based RXR, led by Chairman and Chief Executive Officer Scott Rechler and President Michael Maturo, last year raised $500 million for its first fund dedicated to so-called opportunity zones, in part from high-net-worth individuals corralled by UBS Group AG and Morgan Stanley.
RXR manages $20.1 billion in assets and 25.8 million square feet of commercial real estate, including skyscrapers such as 75 Rockefeller Plaza. It advocates in the investor presentation that New York City must “learn to safely co-exist with the virus in order to minimize economic damage.” The firm is among a group of New York landlords that had been pressing large employers to speed up a return of their workers.
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