Cityview, a Los Angeles-based investment manager and developer focused on the multifamily sector, is preparing to scale its capital raising and investment platforms as it seeks to tap into a broad need for accessible housing.
To this end, the firm in January brought on Christoph Donner, who led the real estate debt and equity business at PIMCO Prime Real Estate, to head global capital development and strategy and open Cityview’s first East Coast office.
“We’ve been preparing to significantly scale the firm and believe the next few years will be strong vintage years for real estate based on the current market dislocation, ability to buy at deep discounts to replacement cost and lack of new supply being built,” Sean Burton, chief executive officer of Cityview, told PERE Credit.
Growing the firm’s platform will be a function of both expanding its relationships with US and international institutional and family office investors, as well as managing its portfolio as efficiently as possible, Burton added.
“Cityview has had a series of institutional co-mingled funds with commitments from major public and private pension systems over the past decade. The company is also doing joint venture deals with well-known institutional partners. We will continue to grow both of those buckets of capital,” Burton added.
Structuring an expansion
Bringing on Donner, with significant expertise in both debt and equity, is a critical part of Cityview’s expansion plans, Burton noted. Burton and Donner have worked together on deals for many years.
“When I decided to retire from PIMCO, there were many possibilities to consider. Over the years, [Cityview’s Burton] has become a trusted partner and friend,” Donner said. “Allianz underwrote and partnered with Cityview on a programmatic venture a few years ago, and we got to know each other more closely [through our respective work for trade group] the Real Estate Roundtable.”
Donner’s remit will include working with Cityview’s existing team on securing and structuring new loans.
“We closed seven transactions last year on probably 20-plus assets that all had debt, and we’ve got a number of other transactions with active loans we’re working on. It’s great to have Christoph’s perspective and expertise working closely with our CFO and our finance team on reviewing the term sheets and thinking about the important provisions,” Burton added.
Capital raising
Cityview launched its seventh real estate value-add and opportunistic fund in 2021 with a target of $400 million in investor capital. The fund secured commitments that include a $100 million allocation from Connecticut Retirement Plans and Trust Funds, according to affiliate title PERE.
“We closed fund VII in December of 2023 and are fully investing the fund now. Our plan is to launch the eighth fund towards the end of the year. We hope it will be larger than fund VII,” Burton said. “We’re partnering our fund with strategic discretionary LP relationships including big asset managers, opportunity funds and value-add funds. We’ll continue to grow those relationships.”
The firm also built a relationship with a large secondary investor last year, through which Cityview recapitalized several assets. “[The partnership] was a great fit because some investors now want to exit as they have other plans for their capital, and that creates buying opportunities for those who want to stay in those markets,” Burton added.
Donner added that Cityview’s capital platforms benefit from its nimbleness at the current scale, which provides access to individual investors and family offices.
“It’s a highly skilled team with vertically integrated asset management and a separate portfolio management company, so we have all the key components for success. But we’re still small enough to maneuver – we can react to individual investors, which is particularly interesting for investors looking for high touch and customization, including certain foreign capital,” Donner said.
In addition, Donner noted the potential to work with debt funds to recapitalize assets.
“Having an angle into the debt fund world is helping us successfully recap certain opportunities for our investors,” he added.
Global perspective
Cityview’s capital platforms are designed to attract both domestic and international investors into US commercial real estate, with Donner noting that the US is still viewed as a favorable area to invest capital by global investors, given its long-term tailwinds such as economic growth and dynamic venture capital momentums.
However, capital partners may hold various views when deploying capital into US commercial real estate, he added.
“Some of them truly are more focused on diversifying their capital, meaning ‘return of capital’ is more important than ‘return on capital,’ and they just need a safe haven. Other people are really driven by the yield – they need additional yield and may be willing to take some risk,” Donner explained.
Multifamily outlook
Burton said Cityview, as a longtime developer and asset manager that focuses on the multifamily market, is looking at attractive acquisition opportunities in vintage properties.
“We’re seeing some really great real estate opportunities in premier supply-constrained markets, particularly in the value-add or core-plus space, where we’re buying at a really significant discount to replacement cost, anywhere from 30-50 percent off what it would cost to build today,” Burton noted.
Many of these acquisitions will be driven by lenders, with Burton citing situations in which borrowers need to sell, but lenders don’t want to own the real estate.
“When you do deals like that, we’ve been surprised at how robust the financing markets have been,” he added. “The debt funds are very active, and I would say spreads have come down 50-75 basis points over the last few months. You’re seeing insurance companies have a lot of capital at play again, particularly for fixed-rate products. And some of the big money center banks are back in business now too.”
Burton noted that the loan maturities seen in the multifamily market will create an opportunity to buy quality real estate, but the key will still be operating the assets well.
“The way you add value is through operational excellence, operating at the highest level possible to really drive to get the most out of the assets,” he said.
Read more: https://www.perecredit.com/inside-cityviews-multifamily-expansion-plans/
