REAL ESTATE- American Realty Advisors has attracted equity commitments totaling $200m (€155m) for its latest close-ended commingled fund, Building for America III.
The real estate manager thinks that a factor in the investor interest was its track record. The portfolio manager on the fund is Kirk Helgeson. He said, “What sets us apart from the other value-added fund managers is that we have been investing in the marketplace with this investment strategy since 1988. We have a history of performing well in our commingled funds.”
Most of the investors in Building for America III were Taft Hartley pension funds. This included a combination of new and repeat investors. American Realty was a co-investor in the fund. It contributed 1% of the total equity raise.
Investors in the fund are projected to achieve a mid teens leveraged IRR return. This yield factors in a two- to five-year kind of holding period.
American Realty Advisors will be using leverage on the fund from 65% to 75%. This will give the commingled fund a total capitalization in the range of $800m.
There were three assets already in the fund at the time when the capital raise was completed. The properties were an apartment complex on the West Coast, an office building in Mountain Time Zone and an industrial property in the Midwest. The investments in these properties total $40m of equity and total gross investment of $150m.
Each of the three properties used a different investment structure. The apartments were acquired through a joint venture. The office deal was done with a mezzanine debt investment. The industrial property was acquired in a direct deal by the fund manager.
Building for America III is a value-added investment fund. It will be looking to invest in existing properties that can be improved through a redevelopment, releasing or repositioning.
American Realty will be investing in the main property types of office, industrial, retail and apartments. There also will be some deals with hotels and self-storage assets. Deals will be considered nationwide. The transactions will be structured as direct equity, senior debt, mezzanine financing, participating debt and joint ventures.
A typical deal size for the fund is in the range of $5m to $30m. American Realty has a goal of being able to find all of the transactions for the fund over the next 12 months. Helgeson said, “We think that this is something that can be achieved.” The commingled fund has a seven -year life.
Martin and Daniel: I asked American Realty to name some investors in the commingled fund and they refused to name any.