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New Jersey to sell stake in Lubert-Adler fund as part of secondary process

  • Lubert-Adler raised $400 mln for Fund VI-B
  • New Jersey SIC committed $100 mln to the fund
  • Still has an interest with NAV of about $20 mln

New Jersey State Investment Council is selling its stake in an older Lubert-Adler Real Estate co-investment fund, pension system documents show.

SIC, which invests the assets of the $78.6 billion state pension system, holds an interest in Lubert-Adler Real Estate Fund VI-B with net asset value of about $20 million, according to pension documents.

Lubert-Adler is allowing existing LPs to cash out their interests in the fund in what appears to be a tender offer process run by Evercore, according to pension documents.

Lubert-Adler has identified a buyer, the document said. The firm is expected to make the formal offer around the end of September or early October.

In a tender offer process, a GP lines up a buyer who is offering a set price, and existing LPs can choose to sell or not. Often, tender offer processes also include an investment of fresh capital from the buyer into a new fund, known as a staple. It’s not clear if that is the case here.

Fund VI-B raised $400 million from four investors, according to a Form D filing from 2011. New Jersey Division of Investment committed $100 million to the fund at that time, according to pension documents.

The fund was structured as a co-investment pool to work alongside the core Lubert-Adler Real Estate Fund VI, which raised just over $2 billion. 

The fund was generating a net internal rate of return of 20.5 percent and a net multiple of 1.8x since New Jersey’s initial investments, pension documents said.

Fund VI-B has 16 investments remaining out of a total of 89, documents said. While Fund VI-B is scheduled to end on Dec. 18, 2018, it will likely need LP approval to extend the fund life.

The 16 investments are in development or not ready to be sold in the near future and could take another three to five years to sell, documents said.

“The division sees little upside from the residual investments going forward. It also believes that participation in the secondary sale would facilitate an efficient exit and would avoid the payment of further fees and expenses over an indeterminate period of time,” the document said.

No one from Lubert-Adler or Evercore returned a request for comment.

Action Item: Read more about the Lubert-Adler fund here: https://bit.ly/2N6Esy4