Petrus Partners and Crown West Realty Announce $125 Million Equity Fund

By Brian K. Miller

SPOKANE, WA – Petrus Partners Ltd. of New York City and its locally based asset management subsidiary Crown West Realty LLC have completed fund raising for their second value-add discretionary fund since 2003. The fund closed with $125 million of equity that the Petrus-Crown West Group plans to parlay into at least $500 million of office and industrial properties over the next three years.

The fund will focus on acquiring mid-sized properties, one typically in need of redevelopment, repositioning or restructuring. It is looking for deals in the $10-million to $100-million range that require individual equity investments of $5 to $25 million.

As for geographic dispersion, the group seeks to assemble portfolios of properties within six to eight metropolitan markets, the strategy being economies of scale in both the acquisition and management of properties. The markets are Phoenix, Denver, Northern New Jersey, Raleigh-Durham, Atlanta, Houston and Dallas.

Petrus president Frank Walter tells the fund has closed on its first two acquisitions, the 110,000-sf SpectraSite Communications headquarters building at 400 Regency Forest Dr. in Carey, NC, and a controlling interest in the 300,000-sf, four-building headquarters of Unilever North America at 700 Slyvan Ave. in Englewood Cliffs, NJ. Both properties are occupied under short-term leases, Walter says.

The plan for the North Carolina property is to release the space and possibly develop an adjacent 11-acre parcel that was part of the deal. The New Jersey property, which was developed in 1969, could either be released or redeveloped, Walter says.

About two-thirds of the capital for both this fund and its original fund comes from retired Goldman Sachs executives, Walter says. The target IRR range for both funds is 13% to 18%, but expectations are higher now that the first third of the inaugural portfolio has been liquidated.

“Suffice to say we’ve been outperforming,” Walter says. “It’s been a good time to invest in real estate; everybody is doing well in this environment.”

Petrus Partners is a private real estate investment firm formed in 1992 by its principals, who were formerly with the Real Estate and Investment Banking departments of Goldman, Sachs & Co. Crown West, organized in 1996, serves as asset manager for Petrus’ investment partnerships, and its staff of 30 is actively engaged in development, leasing, property management, maintenance, finance and accounting.

The Petrus-Crown West Group owns and controls–directly, through discretionary investment funds and in multi-property joint ventures with St. Paul Travelers Cos., Inc.–a nationwide portfolio of office, flex and industrial properties totaling about six million sf.