Palm Beach-based PE firm closes new $495M fund, seeks value-add retail assets

A Palm Beach-based private equity real estate investment firm with one asset in Winter Park announced last week it had closed its fourth fund with $495 million in capital, and will pursue retail properties in major markets over the coming months, including Greater Orlando.

Sterling Organization closed its discretionary fund, Sterling Value Add Partners III, LP (SVAP III), with commitments made by a diverse investor base that includes domestic endowments, large family offices, and public and private pension plans. With leverage, the fund has more than $1.25 billion of buying power, the company said. 

SVAP III will primarily target value-add shopping centers with grocery anchors, street retail, power centers and mixed-use properties in major markets across the United States. Target markets in Florida include Orlando, Tampa, Palm Beach, Fort Lauderdale and Miami. 

The company favors infill locations with population count of 75,000 or more within a three-mile radius, potential for significant income growth, below-market rents, redevelopment opportunities, and deal size of at least $10 million. Real estate fundamentals are prioritized over the credit of existing tenants, according to its website. 

Sterling is actively seeking investments for SVAP III now and the amount of time it takes to fully allocate the fund's capital commitments will depend on the size of deals they acquire. The company has an internal acquisitions team that looks at marketed properties, as well as researches off-market deals. 

Sterling identified a value-add opportunity in 2013 when it acquired the 244,984-square-foot Center of Winter Park shopping center at 501 N. Orlando Avenue. Knowing that anchor tenant Kmart was paying below-market rent, it anticipated the store would close shortly after acquisition.

When Kmart did close, Sterling redeveloped the empty store and replaced it with four tenants paying market rents: Ross Dress for Less, HomeGoods, Marshalls and DSW. 

The property's small shop space was also upgraded and re-tenanted with national credit tenants. Sterling ultimately increased NOI at the property by approximately 103 percent during five years of ownership, said spokeswoman Lauren Perry said.

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