REAL ESTATE - BGP Properties has begun to seek investors for its next investment fund, BGP Investment Partnership Fund VIII, L.P. The company will seek to raise around $650m-$750m.
The company expects a great deal of repeat investors in the new fund. Chief executive Dan DiLella said: "My best guess is that around 80% of our investors from Fund VII will commit to Fund VIII. Investors believe in our strategy and track record."
One of the investors that BGP has had in several of its commingled funds is the Pennsylvania State Employees Retirement System. Pension funds will be a big part of its money raising effort.
It’s projected that investors in the fund will achieve a leveraged IRR in the range of 14% to 16%. This yield assumes a five-year holding period. The total life of the fund lasts for eight years.
The reason for starting to raise capital for the next fund now is that around 76% of the $550m of equity raised for BGP Investment Partnership Fund VII has been invested. DiLella said, "It’s time to start raising new capital to keep the deal flow moving in the right direction."
DiLella thinks that there is one thing that sets its company apart from some other investment funds. He said, "We have 15 acquisition people that out in the marketplace looking for deals all the time. Not many other companies can say that."
The total capitalization of Fund VIII will be around $2.1bn. This will be achieved by using around 65% leverage.
The investment strategy is to find real estate that it can add value to. This normally means buying existing properties that can be improved through new management, releasing or repositioning. It will look for properties in the major metropolitan areas across the US.