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With A Billion-Plus In Its War Chest, Sterling Organization Goes On The Prowl For Overlooked Retail Assets

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Private equity investor Sterling Organization has closed its third value-add retail real estate fund at $495M, beating its $450M target.

The oversubscription hints that some investors believe there are still retail diamonds in the rough to be found, despite tough times for the retail industry.

Grocery store, bananas

The limited partners of Sterling Value Add Partners III L.P. include domestic endowments, foundations, private and public pension plans, funds of funds and large family offices, according to Sterling. 

The fund will target grocery-anchored shopping centers, street retail, power centers and mixed-use properties in major U.S. markets. With leverage, SVAP III has more than $1.25B of buying power.

"As a result of macro challenges facing traditional retailers, we are keenly aware that it is not an easy time politically for institutional investors to invest in brick-and-mortar retail real estate," Sterling President and CEO Brian Kosoy said in a statement, adding that the fund will work "tirelessly to take advantage of market dislocation.”

The second fund in the series, Sterling Value Add Partners II, closed with total capital commitments of $311M. Sterling also has a core closed-end fund vehicle, Sterling United Properties I, which closed with total commitments of $160M.

Earlier this month, SUP I acquired two Cub Foods-anchored shopping centers in Coon Rapids and Arden Hills, Minnesota, for $41.7M from IRC Retail Centers. The Coon Rapids property was the 208K SF Village Ten Shopping Center and the Arden property was the 97K SF Shanon Square Shoppes.