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How $800 Million of Texas-based Capital Could Fuel the Next Big U.S. Real Estate Company

Banner Oak Capital Partners Could Pick Two New Operators to Invest In by Year's End
June 29, 2018
A year-and-a-half after spinning off from Dallas-based Hunt Realty, Banner Oak Capital Partners has closed on two new funds totaling $800 million with the Teachers Retirement System of Texas to back real estate operating companies and invest in real estate managed by those firms.

Banner Oak Capital has raised $300 million to invest in real estate operating companies outside of the firm's historical purview, as well as an additional $500 million to invest in real estate managed by those operating companies.

The real estate investment arm has already begun meeting with would-be suitors and could begin extending partnership opportunities by year's end, said Geoffrey Osburn, president of Banner Oak Capital.

Geoffrey Osburn, president of Banner Oak.

"We are looking to invest in sectors we are not already invested in," Osburn told CoStar News. "We are currently investigating four areas of potential opportunities that we haven't historically invested in, which are student housing, medical office, and manufactured housing and data centers."

In the past, Banner Oak Capital, which spun off from Ray Hunt-owned Hunt Realty in September 2016, has invested in multifamily, industrial, senior housing and retail properties. Banner Oak was formed specifically to manage funds for Teachers Retirement System of Texas.

The real estate investment firm has seen past success by investing in operating companies alongside projects. And Banner Oak plans to emulate past successes in the future.

"We have tended to see more success in the companies we have been capitalizing," Osburn said, adding Dallas-based Trinsic Residential Group of Dallas is a prime example of past success. Trinsic, a privately-held multifamily development firm, has seen revenue success as it has grown beyond the Texas borders to a more national reach.

Banner Oak Capital has also invested in Chicago-based Bridge Development Partners for industrial real estate, and Capital Health Group, which has senior housing facilities on the East Coast. The investment firm also has money in Dallas-based Cypress Equities, which is led by Chris Maguire.

With each investment, Banner Oak has helped emerging real estate operating companies, which is something Osburn said he expects to carry forward in new partnership deals.

"This would be a new portfolio with three to four operating companies in spaces we are not active in today," he said.
Banner Oak has already begun having conversations with several student housing prospects and a data center operator, but it is still early in the process and there have been no formal negotiations, he said. By the end of the year, the investment firm could create at least one to two operating companies.

The fund tied to jump-starting the operating companies has a projected five-year window, which gives Banner Oak enough time to find the right partners, but speed is also important.

"We want to capitalize them as quickly as we can because our track record shows they can be successful," Osburn said. "In each case, our objective is to grow them from being a regional player to a national player. That tends to take multiple years and we want to find the right partners as reasonably as possible."

The Teachers Retirement System of Texas could invest in companies throughout the United States, but Osburn said Texas firms, especially Dallas-based companies, tend to be at the forefront because there is a naturally built-in network in the North Texas business community.

Candace Carlisle, Dallas-Fort Worth Reporter  CoStar Group   
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