By Jon Peterson
Greensboro, North Carolina-based Bell Partners is seeking a $1 billion capital raise for its newest commingled fund, which will have an investment focus targeting apartment assets across major markets in the country. The Bell Value-Add Fund VIII will also look for suitable investments in the West Coast markets, according to a board meeting document from the New Mexico State Investment Council.
This commingled fund is planning to acquire assets in the San Francisco Bay Area, Seattle and Los Angeles, while some of its other targeted markets will include Boston, Austin, Denver, Dallas and Washington, D.C. The fund manager already has a significant presence on the West Coast and had opened regional offices in both San Francisco and Los Angeles in the past.
The planned capital raise by Bell is projected to be slightly larger than its previous fund in the product series. The investment firm had a final close on Fund VII in June 2020 with a $950 million raise, according to published reports.
Fund VIII is early in its capital-raising process. One of its newest investors in the fund is the New Mexico SIC, which is looking to put down a $100 million commitment, as confirmed by the sovereign wealth fund in a telephone conversation.
Bell’s investment criteria for these markets will include properties that demonstrate favorable supply-demand characteristics, above-average employment and population growth and sufficient institutional-grade transaction volume.
This will include apartment complexes that are considered to be either B+ or A from a quality perspective. Bell’s strategy is to add value to its purchases through a mixture of property enhancements or operational improvements that will drive net operating income growth over the period that the property is in the commingled fund.
Bell will be looking for two types of assets based on age. Older vintage properties in well-established areas that could be updated and amenitized to yield higher rents, as well as newer properties, including recently completed developments, that are acquired in emerging neighborhoods.
Bell generally eschews development risk. This is a trait that many institutional investors favor at a time when inflation costs, supply chain disruptions and rising rates associated with construction financing create higher than usual risk for these types of activities.
The targeted returns for the new commingled fund are low double-digit net IRRs. This yield is expected to be derived from income and the balance from capital appreciation.