By Jon Peterson
San Diego-based Fairfield Residential has been a stalwart multifamily investment and management firm with properties across the country. The company regularly seeks institutional funding for its acquisitions and one of its newest funds, the Fairfield Affordable Housing Preservation Fund, has reached a sizable commitment totaling $600 million, according to published reports covering the fund.
Fairfield will be looking to invest a large portion of this fund across the state of California, where it will be looking for properties that are located in either Northern or Southern California. The fund will also target additional locations in markets such as metro Washington, D.C., and properties located across the states of Florida and Texas.
Fairfield declined to comment when contacted for this story.
The general investment strategy for the commingled fund will be to acquire existing apartments with low-income housing tax credits that feature long-term rent and income regulatory agreements already in place. The targeted returns for the fund is looking to achieve are 9 percent to 10 percent net IRR, with the maximum amount of leverage planned for the fund around 65 percent.
The current amount that Fairfield raised is considered a founders round, the company is targeting a total raise of $1 billion, according to sources familiar with the fund’s strategy and plans. One of the initial investors into the commingled fund with a $300 million commitment was the Alaska Permanent Fund Corporation. The state’s sovereign wealth fund dislocated this in a board meeting document, which was recently held. Other investors in the commingled fund include a mixture of pension funds and foundations located in the United States or internationally.
This commingled fund has an open-ended investment strategy, which is a necessary structure given the property type in which it will be investing. It is anticipated that the assets for the fund will be held for a period of 10 to 20 years, and a holding period for this length of time would likely not be accepted by many investors if this was structured as a closed-end fund, which typically has a holding period of three to seven years.
Fairfield has a long and successful history of investing capital in affordable housing assets. In the span of 20 years, the company has built an $11 billion residential housing portfolio and has $3 billion of its investments in the low-income housing tax-credit arena. The Housing Preservation Fund will be the manager’s first vehicle with the property type open to third-party investors.
Fairfield was founded in 1985, and over the next couple of decades, it expanded to encompass redevelopment, asset management, and dispositions as the company builds prominent equity relationships, according to its website. In 2002, the company formed a joint venture with California State Teachers Retirement System (CalSTRS), which it expanded in 2005 to a company partnership. In 2016, Fairfield celebrated its 500th acquisition.