486BPOS: Harrison Street Real Assets Fund LLC Updates Registration, Details Fund Operations and Risks

Harrison Street Real Assets Fund LLC, formerly Versus Capital Real Assets Fund LLC, filed an updated registration statement detailing its investment strategy in real assets, operational structure, and associated risks, while reporting a decrease in net assets and total return for the fiscal year ended March 31, 2025.

Summary

• The Fund, now named Harrison Street Real Assets Fund LLC, is a Delaware limited liability company registered as a non-diversified, closed-end interval fund, continuously offering shares and repurchasing 5% to 25% of outstanding shares quarterly.
• The investment objective is to achieve long-term Real Returns (inflation-adjusted total returns) through current income and capital appreciation with low correlation to broader public equity and debt markets.
• At least 80% of net assets, plus borrowings, are allocated to U.S. and non-U.S. public and private investments in infrastructure, timberland, and agriculture/farmland.
• Exposure to real assets is gained through third-party private funds, wholly-owned subsidiaries (VCRRX Subsidiary, Sub-REIT), publicly traded Real Asset Securities, and direct private debt investments.
• The Fund's investment adviser, Harrison Street Private Wealth LLC (formerly Versus Capital Advisors LLC), manages the Fund and is approximately 75% owned by Colliers International Group Inc.
• Total Annual Fund Operating Expenses were 1.87% of net assets for the fiscal year ended March 31, 2025, excluding estimated operating costs of 'Other Private Funds' which would increase the total to 2.87%.
• Net assets decreased to $2.596 billion as of March 31, 2025, from $2.947 billion in the prior year.
• Total return based on Net Asset Value for the fiscal year ended March 31, 2025, was 5.13%, a decline from 10.91% in 2022 and 9.35% in 2021.
• The Fund is considered an illiquid investment, as its shares are not listed on any securities exchange and no secondary market is expected to develop.
• Minimum initial investment is $10 million for institutional investors and $10,000 for certain company personnel, with the Adviser having discretion to waive these minimums.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the fund maintains a clear investment strategy in real assets and has positive total returns, the significant decline in performance compared to prior years, the decrease in net assets, and the increase in expense ratios are concerning. The illiquid nature and high fee structure also weigh on the overall outlook, despite management's efforts to mitigate some fees.

Positives

• The Fund aims for 'Real Returns' (inflation-adjusted) and low correlation to public markets, which can be attractive for diversification.
• The Adviser contractually agrees to reduce its Investment Management Fee by any management fees received from the VCRRX Subsidiary and waive fees from the Sub-REIT, ensuring the total Investment Management Fee for the collective net assets remains at 1.15%.
• A voluntary waiver of Investment Management Fees, estimated at 0.08% of net assets, will be applied to offset management and performance fees paid to Harrison Street Infrastructure Fund LP, effective July 28, 2025.
• The Fund provides limited liquidity through quarterly repurchase offers of 5% to 25% of outstanding shares, a feature for an otherwise illiquid investment.

Negatives

• The Fund is an illiquid investment with no anticipated secondary market for its shares, meaning investors cannot easily sell their shares outside of quarterly repurchase offers.
• Total Annual Fund Operating Expenses are substantial at 1.87%, and could be as high as 2.87% if all indirect operating costs from 'Other Private Funds' were included.
• Net assets decreased by approximately $351.5 million from March 31, 2024, to March 31, 2025, indicating a decline in asset base.
• Total return based on NAV significantly declined to 5.13% in 2025 from 10.91% in 2022 and 9.35% in 2021, suggesting a weakening performance trend.
• Distributions may include a 'return of capital,' which reduces a shareholder's tax basis and could lead to higher taxable gains upon subsequent disposition of shares.
• The Fund's non-diversified status under the Investment Company Act means it can invest a greater portion of assets in a limited number of issuers, increasing risk and volatility.

Risks

• Infrastructure-Related Companies Risk: Subject to economic conditions, supply/demand, interest rates, environmental laws, disruptive weather, energy prices, and regulatory changes.
• Timberland-Related Companies Risk: Volatility of forest product prices, trade/tariff policies, competition from alternative materials, illiquidity, and losses from natural disasters.
• Agriculture/Farmland-Related Companies Risk: Adverse changes in economic/natural conditions, financial health of tenants, marketability of crops, and governmental regulations on chemicals.
• Liquidity Risk: Substantial portion of assets in illiquid securities, limited ability to sell at opportune times or prices, and potential for delays or suspensions in quarterly repurchase offers.
• Interval Fund Risk: Limited liquidity through quarterly repurchase offers (5-25%), no public listing or secondary market, making it unsuitable for investors needing liquid access to funds.
• Valuation Risk: Difficulty in ascertaining the value of private investments, reliance on subjective appraisals, potential for inaccurate valuations affecting NAV and shareholder transactions.
• Leverage Risk: Increased volatility of NAV and investment return, reduced shareholder return due to interest rate fluctuations, magnified losses in declining markets, and increased operating costs.
• Debt Securities and Related Investments Risk: Credit risk, interest rate risk, illiquidity of unrated or below-investment-grade debt, and reliance on arrangers for sourcing opportunities.
• Loan Assignment and Participation Risk: Limited rights to enforce loan terms, potential for partial ownership of collateral, and exposure to credit risk of both borrower and selling lender.
• Credit Risk: Issuers or guarantors may default on payments or go bankrupt, leading to significant NAV deterioration, especially for non-investment grade fixed income securities.
• High Yield Securities Risk: Predominantly speculative, greater risk of loss, higher sensitivity to economic downturns, and less liquid secondary markets.
• Market Disruption, Health Crises, Terrorism and Geopolitical Risks: Negative effects from broad investment environment, war, terrorism, sanctions, trade wars, and global health crises (e.g., COVID-19).
• Active Management Risk: Dependence on Adviser's and Managers' analytical skills and judgment, limited market opportunities in certain real asset investments, and potential for conflicting investment decisions among managers.
• Equity Securities Risk: Fluctuations based on company financial condition, market/economic conditions, and industry-specific factors; preferred securities may have deferred distributions and limited voting rights.
• Private Funds Risk: Investments not subject to Investment Company Act protections, limited transparency into underlying portfolios, risk of fraud or deviation from strategy, and potential for two layers of fees and expenses.
• Foreign Investing Risk: Exposure to economic, political, regulatory, and social risks in foreign countries, restrictions on foreign ownership, and potential for punitive taxation or exchange controls.
• Currency and Exchange Rate Risks: Fluctuations in foreign exchange rates can adversely impact portfolio value and distributions, and hedging strategies may not always be successful.
• Interest Rate Risk: Rising interest rates can cause a decline in the value of fixed income investments and increase borrowing costs, potentially reducing NAV and increasing shareholder repurchases.
• Environmental and Unforeseen Liabilities Risk: Substantial loss from environmental problems (e.g., climate change effects, hazardous substances), changes in environmental laws, and undisclosed liabilities.
• Business and Regulatory Risks: Adverse effects from legal, tax, and regulatory changes, general economic conditions, and the increasing use of AI Technologies.
• Fees and Expenses Risk: Shareholders bear two layers of fees (Fund and underlying Private Fund/Subsidiary/Sub-REIT), which can be substantial and include sourcing fees for private debt opportunities.
• Emerging Markets Risk: Greater risks of expropriation, confiscatory taxation, political/economic instability, small/illiquid markets, and less stringent accounting/regulatory standards.
• Issuer Risk: Value decline due to issuer-specific reasons (management, leverage, demand), and higher risk/expenses when investing in distressed debt.
• Underlying Investment Risk: Exposure to risks of underlying vehicles (Sub-REIT, Subsidiaries) which are not registered under the Investment Company Act, and potential for changes in laws affecting their operations.
• Tax Risks (Fund, Subsidiaries, Sub-REIT): Difficulty in maintaining RIC status due to lack of transparency from Private Funds, potential for corporate-level taxation, excise taxes, and complex rules for Sub-REIT qualification.
• Mezzanine Loan Risk: Higher risk than first mortgage loans, potential for investments to become unsecured, and risk of not recovering investment.
• Preferred Securities Risk: Market and liquidity risks, sensitivity to issuer's economic condition, and potential for deferred dividend payments.
• Joint Venture Risk: Risks not present in other investment methods, potential for disputes with partners, and unfunded commitments.
• Property Manager Risk: Dependence on property managers for day-to-day operations, limited Fund control, and potential adverse impact from issues with managers.
• Loan Origination Risk: Dependence on availability of opportunities, interest rate volatility, financing availability, and potential for concentration in certain borrowers if loans cannot be sold.
• Access Risk: Reliance on arrangers for suitable investment opportunities, substantial due diligence for private investments, and potential inability to deploy capital effectively.
• Investments in Third-Party Managed REITs Risk: General real estate risks, limited financial resources of REITs, leverage risk, and two layers of management fees.
• Privately Placed Securities Risk: Subject to liquidity and valuation risks, limited market, less available information, and time-consuming/costly disposition.
• Market Capitalization Risk: Higher risks with medium, smaller, and micro-cap companies due to less predictable earnings, more volatile prices, and less liquid markets.
• Reliance on Key Persons Risk: Fund relies on executive officers with specific knowledge; loss of these personnel could adversely impact the Fund.
• Focused Investment Risk: Greater risk and volatility due to substantial asset allocation in a particular asset type, industry, sector, geographic location, or securities instrument.
• Hedging Transactions Risk: May limit gains, no assurance of success, potential for imperfect correlation, and exposure to counterparty and liquidity risk.
• Fund Capitalization Risk: Inability to raise sufficient capital may adversely affect diversification, financial condition, liquidity, and regulatory/tax compliance.
• Diversification Risk: As a non-diversified fund, greater risk with respect to portfolio securities due to concentration in a limited number of issuers.
• Reference Benchmark Risk: Exposure to interest rate benchmarks (e.g., SOFR) subject to regulatory reform, potential for volatility, and changes in calculation methods.
• Cybersecurity Risk: Susceptibility to operational and information security risks, potential for financial losses, disruptions, and increased risk from AI Technologies and remote work.

Future Outlook

The Fund will continue its continuous offering of shares and aims to invest proceeds in accordance with its real asset investment objective. It may invest in short-term, high-quality debt securities for cash management or while seeking investment opportunities. The Fund intends to limit its borrowing and overall leverage to an amount not exceeding 33-1/3% of its gross asset value. The Board may consider terminating its interval fund status and listing shares on a national exchange if the Fund reaches a certain asset amount, subject to shareholder approval.

Management Comments

• The Adviser has rebranded as Harrison Street Private Wealth LLC, effective July 28, 2025, in connection with the launch of a dedicated private wealth division by Colliers investment management segment.
• The Adviser contractually agrees to reduce the Investment Management Fee paid by the Fund in an amount equal to any management fees it receives from the VCRRX Subsidiary and to waive any management fees payable by the Sub-REIT, ensuring the total Investment Management Fee is calculated at a rate of 1.15% for the collective net assets.
• The Adviser has agreed to voluntarily waive a portion of the Investment Management Fee equal to the management and performance fees paid by the Fund to Harrison Street Infrastructure Fund LP, estimated to result in an annualized waiver of approximately 0.08% of the Fund's March 31, 2025 net assets, effective July 28, 2025.
• The Board monitors potential conflicts of interest arising from the Adviser's compensation structure and asset allocation decisions among sub-advisers and direct investments.

Industry Context

The Fund operates within the real assets investment sector, focusing on infrastructure, timberland, and agriculture/farmland. This sector is often sought for its potential for long-term 'Real Returns' (inflation-adjusted) and low correlation to traditional public equity and debt markets, offering diversification benefits. The shift towards private wealth divisions by larger asset managers, as indicated by the Adviser's rebranding, reflects a broader industry trend of making alternative and illiquid asset classes more accessible to a wider range of investors, albeit with high minimums for this specific fund. The termination of the sub-advisory agreement with Lazard and the transition of administrative services to UMB Fund Services suggest ongoing operational adjustments within the competitive asset management landscape.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• The Fund is not currently involved in any material legal proceedings, and no material legal proceedings are threatened against the Fund.

Related Party Transactions

• The Adviser, Harrison Street Private Wealth LLC, is approximately 75% owned by Colliers International Group Inc., creating an affiliation.
• The Adviser pays the Sub-Adviser, Brookfield Public Securities Group LLC, a sub-advisory fee from its Investment Management Fee, creating an economic incentive for the Adviser regarding asset allocation to the Sub-Adviser.
• The Adviser contractually reduces its Investment Management Fee by management fees received from the VCRRX Subsidiary and waives fees from the Sub-REIT to avoid double-counting assets, ensuring the total Investment Management Fee for the collective net assets remains at 1.15%.
• Effective July 28, 2025, the Adviser voluntarily waives a portion of the Investment Management Fee (estimated 0.08% of March 31, 2025 net assets) to offset management and performance fees paid by the Fund to Harrison Street Infrastructure Fund LP.
• The Adviser compensates financial intermediaries for distribution-related activities and ongoing services out of its own resources, which may create a conflict of interest for intermediaries to recommend the Fund's shares.

Stakeholder Impact

• Shareholders: Face significant illiquidity due to no secondary market, relying solely on quarterly repurchase offers which may be prorated. They bear substantial direct and indirect fees, and distributions may include a return of capital with tax implications. Performance has declined recently.
• Employees/Management: Subject to a Joint Code of Ethics, personal trading policies, and disclosure requirements for outside business activities, gifts, and entertainment, ensuring ethical conduct and conflict management.
• Service Providers: BNY Mellon is being replaced by UMB Fund Services, Inc. for transfer agency, administrative, and accounting services, indicating a change in key operational relationships.
• Adviser: Benefits from the Investment Management Fee based on NAV, but also bears the cost of sub-adviser fees and compensates intermediaries, creating potential conflicts of interest in asset allocation and distribution.

Next Steps

• The Fund will continue to make quarterly repurchase offers for 5% to 25% of outstanding shares.
• UMB Fund Services, Inc. is expected to replace BNY Mellon Investment Servicing (US) Inc. and The Bank of New York Mellon for transfer agency, administrative, and accounting services around September 30, 2025.
• The Board may decide to terminate the Fund's interval fund status and list its shares on a national exchange, subject to shareholder approval, if it reaches a certain asset amount.

Key Dates

Keywords

Real Assets, Interval Fund, Infrastructure, Timberland, Agriculture, Farmland, Private Funds, REIT, Closed-End Fund, SEC Filing, Investment Management, Alternative Investments, Illiquid Investments, Leverage, Private Debt