Artemis Real Estate Partners Closes $2.2B Fundraising Round

D.C.-based private equity firm said it will target opportunistic and value-add transactions

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And the supply of dry powder from private equity grows even larger. 

Artemis Real Estate Partners, a national real estate investment firm, announced Monday that its fourth value-add fund, Artemis Fund IV, closed with $2.2 billion in equity commitments. Together with the $1 billion the firm’s Healthcare Fund II raised in June 2022 and a $500 million core credit platform, Artemis now has roughly $3 billion on hand to invest in distressed real estate opportunities. 

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Artemis Co-President Anar Chudgar told Commercial Observer that Fund IV exceeded the firm’s most recent equity fundraising round, Fund III, by more than $1 billion. She added that Artemis was able to leverage strong support from a diverse group of institutional investors that included public and corporate pension funds, endowments, foundations, family offices and — for the first time — a pair of sovereign wealth funds in the Middle East and Asia

“We’re extremely well positioned to capitalize on market volatility, but more importantly, leverage our firm’s 13-plus-year track record and national operating partner network and relationships to invest in a diverse set of investments across the capital stack and across property types,” she said. “We will not invest in asset classes where we do not have confidence and true visibility and revenue streams.”

Fund IV co-portfolio managers Rich Banjo and Michael Vu said Artemis’s new batch of dry powder will focus on injecting capital into selective opportunistic and value-add transactions. 

“Fund IV positions Artemis to continue investing with our national network of operating partners and will allow us to identify overlooked and situationally distressed opportunities in the marketplace,” Banjo and Vu said in a joint statement. “We believe this fund closing will enable us to capture opportunities at scale across the middle market, particularly in today’s environment.”

Value-add investments usually don’t provide much cash-flow upon investment, but carry the opportunity for ample returns once debt has been used to add value to the property — as seen in many older Class A or B office properties undergoing changes. Opportunistic investments carry the most risk in the CRE investment space, require the most leverage, and generate the greatest rewards; ground-up developments, empty buildings, and land deals fall under this category.   

The $2.2 billion raised by Artemis this round is the latest example of institutional investor capital rushing into the nation’s sprawling private equity network. Private Equity International estimated that 1,520 funds raised $727.3 billion in 2022. 

The private equity industry has watched this infusion grow as interest rate increases initiated by the Federal Reserve over the last 14 months have combined with a broad pullback in bank lending following a regional banking crisis this spring to sap liquidity across the lending universe and create an environment of widespread distress across CRE asset classes. 

Blackstone (BX)’s global real estate investment fund, BREP X, closed a $30.4 billion fundraising round in mid-April, while Brookfield (BN) Asset Management’s flagship real estate fund, Brookfield Strategic Real Estate Partners IV, raised $17 billion in late 2022. 

As an estimated $500 billion in CRE loans matures this year, sponsors will be on the lookout for new investment partners to provide either mezzanine financing or preferred equity stakes in vulnerable capital stacks that have been bombarded by asset price revaluations and expanded risk adjustments on floating-rate loans. Across the system, the increased leverage ratios on existing loans have put pressure on borrowers and occasionally made it impossible to either keep loans current or refinance maturing loans without significant equity infusions. 

Chudgar said private equity is prepared to fill the void at a time of unprecedented distress. 

“We’re experiencing the most significant and rapid period of dislocation that I’ve experienced in my 20-year investing career,” she told CO. “We’re seeing a real supply-and-demand imbalance between demand for commercial real estate debt and the supply, so I think that’s the real difference in commercial real estate waters, and it’s what we’re navigating in the investment environment today.” 

While Chudgar didn’t go into specifics about where Artemis will target its real estate investments, she noted that Fund III has been “more overweight in residential and logistics strategies” and that the firm has been investing in niche asset classes since its founding in 2009. 

“We do see the tailwinds in certain asset classes and we’ll continue to invest in those,” she added.  

Artemis says it has acquired over $13 billion in gross debt and equity purchases across more than 300 investments and raised more than $9 billion in capital since its founding. The firm began under the leadership of Co-CEO Deborah Harmon and Penny Pritzker, who in 2013 would become U.S. commerce secretary under President Barack Obama. 

Artemis is based out of Washington, D.C., with offices in New York, Los Angeles and Atlanta.  

Brian Pascus can be reached at bpascus@commercialobserver.com