By Jon Peterson
Since the start of economic calamity initiated by COVID-19, the multifamily sector has been one of two that has shown some resiliency in the market, and institutional investors have been raising funds to prepare for acquisitions. San Francisco-based FPA Multifamily is one of those firms, which recently raised $970 million for its latest commingled fund, according to industry sources, the FPA Core Plus Fund V.
The company has listed on its website that it has a national investment program for its transactions and included in that strategy are the markets of the San Francisco Bay Area and the greater Seattle region.
The capital raised by the manager was much higher than its original target, and the firm raised almost 30 percent more for this fund than the original goal fo $750 million. This is reflective of the fact that many institutional investors want more apartment assets in their portfolios, since they believe this property type along with industrial will be the best performing property types during the current state of economic uncertainty.
FPA did not respond to a phone call seeking comment for this story.
One of the investors to place capital into the commingled fund near its final close was the State of Wisconsin Investment Board, which approved a $100 million commitment into the fund during the second quarter, according to information provided by the pension fund. SWIB has placed its commitment into the core risk category of its real estate portfolio.
At least two other major institutional investors placed capital into the fund with commitments of $100 million each. These were the New Mexico State Investment Council and the Tennessee Consolidated Retirement System, according to information provided by each investor.
The commingled fund will be looking to acquire a mixture of A- and B-quality apartment complexes that have minor physical or operational issues. It will seek to buy properties at below replacement cost, since it has shown an ability to find assets to acquire through its own network of sources.
FPA will be looking to acquire properties that will be able to produce net leverage IRRs in the range of 9 percent to 11 percent. The amount of leverage on the fund will not exceed 50 percent.