Key Takeaways
- • Two Sigma's real estate unit is ditching many senior staff and pausing new investments, according to Bloomberg, and has stopped fundraising altogether, two years after opening to outside capital.
- • Rich Gomel, who joined five years ago to lead the unit, is exiting, and two of the three remaining partners are also leaving, including one of the unit's data science heads.
- • The unit targeted a $2 billion raise but could not reach $1 billion before halting its efforts.
- • Two Sigma's real estate struggles coincide with turmoil at the $85 billion firm, where John Overdeck faces a divorce trial and a legal standoff with co-founder David Siegel, per the Wall Street Journal.
Summary
Two Sigma Investments is significantly scaling back its real estate efforts. Two years after opening the door to outside capital, the company's real estate unit, which focuses on housing and industrial deals, is cutting many of its senior staff, pausing new investments and halting fundraising, Bloomberg reported. Two Sigma declined to comment. The unit is not being fully disbanded, as staff remain necessary to manage properties already in the firm's portfolio.
Rich Gomel, who joined the quantitative hedge fund five years ago to spearhead the real estate unit, is leaving the company. Two of the three remaining partners in the unit are also departing, including one of its data science heads.
Fundraising proved a major obstacle. When the unit opened to outside investment, its target was a $2 billion raise, but it could not reach $1 billion before deciding to stop. The Real Deal notes this reflects a broader industry struggle: private real estate fundraising was slightly above $30 billion in the third quarter, the lowest quarterly total in 13 years, according to PEI Group. Among the investors in the unit's vehicles was the Teacher Retirement System of Texas, which committed $75 million to the Real Estate Opportunity Fund and another $60 million to a co-investment strategy.
The retreat comes amid broader turmoil at Two Sigma. According to the Wall Street Journal, John Overdeck faces both a divorce trial with his wife Laura and a legal standoff with co-founder David Siegel, a dispute that threatens to imperil control over the firm, which manages $85 billion.
The unit had been active in recent deals. In March, Kaufman Organization and AXA Financial sold the 137,000-square-foot office building at 40 West 25th Street in Manhattan's Flatiron District to Kaufman Investments and Two Sigma Real Estate for $52 million, or $380 per square foot. The property is 80 percent leased, with Wasserman Media Group and HelloFresh each occupying 22,000 square feet.
Rich Gomel, who joined the quantitative hedge fund five years ago to spearhead the real estate unit, is leaving the company. Two of the three remaining partners in the unit are also departing, including one of its data science heads.
Fundraising proved a major obstacle. When the unit opened to outside investment, its target was a $2 billion raise, but it could not reach $1 billion before deciding to stop. The Real Deal notes this reflects a broader industry struggle: private real estate fundraising was slightly above $30 billion in the third quarter, the lowest quarterly total in 13 years, according to PEI Group. Among the investors in the unit's vehicles was the Teacher Retirement System of Texas, which committed $75 million to the Real Estate Opportunity Fund and another $60 million to a co-investment strategy.
The retreat comes amid broader turmoil at Two Sigma. According to the Wall Street Journal, John Overdeck faces both a divorce trial with his wife Laura and a legal standoff with co-founder David Siegel, a dispute that threatens to imperil control over the firm, which manages $85 billion.
The unit had been active in recent deals. In March, Kaufman Organization and AXA Financial sold the 137,000-square-foot office building at 40 West 25th Street in Manhattan's Flatiron District to Kaufman Investments and Two Sigma Real Estate for $52 million, or $380 per square foot. The property is 80 percent leased, with Wasserman Media Group and HelloFresh each occupying 22,000 square feet.
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