A pair of sharpshooter managers have developed similar fund strategies amid a difficult real estate market. New York and London-based Meadow Partners and New Jersey-based Faropoint both announced fundraisings this week for vehicles with similar strategies, essentially involving smaller transaction sizes. Significantly, both capital raising efforts also exceeded the targets set by their managers – as sure a sign of institutional support as there is.
Meadow Partners, which closed its sixth flagship fund, Meadow Real Estate Fund VI, with $530 million in commitments, has lowered its average equity investment to just under $5 million, about a quarter of its previous average investment of $25 million. The firm’s idea is to target smaller property owners, which are likely to encounter more distressed circumstances than their larger counterparts.
Similarly, for Faropoint’s third flagship fund, Faropoint Industrial Value Fund III, which has $915 million in commitments, the firm is targeting an average price per asset of roughly $10 million as it executes its warehouse strategy. Those assets usually belong to individuals or family owners who often only have a single asset.
Faropoint and Meadow Partners have both homed in on opportunities they consider to be too small for larger managers to pursue. Large managers, under pressure to deploy more capital, cannot typical dedicate capacity to a large volume of smaller deals, instead often striving for bigger ticket outlets with their capital. In fact, Faropoint’s exit strategy revolves around their inability to do so, an aggregation technique centered around bundling together portfolios to sell to larger buyers.
Notably, in a market hampered by low transaction volumes, neither manager has had trouble finding assets. Meadow has undertaken 10 transactions with its sixth fund, including two gap financing deals, and has more deals upcoming. Faropoint’s fund, meanwhile, is 40 percent called.
Their capital deployment successes come at a time when stubbornly high bid-ask spreads are stemming capital placement among other managers, which in turn has led to fund extensions. Indeed, the average time in market for closed-end funds rose to 22 months for funds closed in 2024, up from 19 the year prior, according to PERE data.
Faropoint and Meadow Partners do not necessarily have demonstrably better strategies than their rivals. Meadow Partners’ past funds have had mixed results, with several falling short of the typical IRR rate expected for opportunistic funds. Faropoint, for its part, has yet to unload the assets it bought for its second fund. And both managers’ most recent round of fundraising took about two years, in line with the industry average.
But in an industry increasingly dominated by a handful of behemoths, Faropoint and Meadow Partners are a reminder that smaller managers can find crevices too small for their bigger peers to fit. And judging by the stellar fundraising efforts by both firms, institutional investors expect their strategies to be every bit as competitive.
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