REAL ESTATE – US manager JER Partners has started the process of buying properties for its next commingled fund, JER Partners IV. Among the first properties for the fund was the acquisition of the Fairview Park Marriott in Falls Church, Va., for $108.5m (€81.4m) in an all cash deal.
The real estate manager is still raising capital and total raised could be as much as $1.25bn. The aim is to complete this by the fourth quarter of this year.
Pension funds will be a major focus of JER Partners. Its previous investment funds attracted investors such as Virginia Retirement System and Teachers’ Retirement System of the State of Illinois.
JER Partners will be making a commitment of $15m as a co-investment for the commingled fund. Its been projected that investors in the fund will achieve a leverage IRR in the range of 18%, assuming a three- to five-year holding period.
The real estate manager will be looking at a variety of property types, including hotels, office buildings and apartments. The strategy will include development, redevelopment and reposition strategies. Deal structures could be private or preferred equity and mezzanine.
PER principal Alex Gilbert, who was involved in the Fairview Park Marriott deal, said: "We think that this property is situated in a good spot. Its part of the Fairview Office Park, where there will eventually be 3.7m feet2 of office space built. Our asset is the only hotel permitted in the park. We think that there will be many office tenants in the park that will take up some rooms in the hotel."
All of the 394 rooms in the hotel were renovated by the previous ownership. JER will be making some additional improvements to the property in the near future. This work will include fixing up the lobby, restaurant, lounge, gift shop and meeting space.
The property first opened for business in 1989. JER Partners is figuring that for 2007 average annual occupancy will be in the range of 68% to 69% and the ADR will be $165 to $175.
JER is now looking at buying hotels in other US markets, such as San Francisco and Chicago.