By Jon Peterson
Invesco Real Estate has put together a pre-seeded portfolio for its new commingled fund, Invesco U.S. Value-Add Real Estate Fund V. Two of the seven properties are in the San Francisco Bay Area, as stated in a board meeting document by the Contra Coast County Employees’ Retirement Association.
One of the assets has already been acquired. The commingled fund made a $36 million equity investment into the purchase of “Campus Drive in San Francisco,” according to the document. However, this property, which will be re-tenanted, is likely one of the properties located on Campus Drive in San Mateo, since there is no Campus Drive in the city of San Mateo. The targeted IRR on this investment is 22 percent with a 1.5 times equity multiple.
The other Bay Area asset is still in due diligence from an acquisition standpoint. This transaction is to make a $49 million equity investment for the development that the document calls “Hanover Diridon” apartment complex in San Jose. The document could be referring to the Hanover Cannery Park apartment complex located at 415 E. Taylor Street in San Jose. This is a brand new apartment complex that was completed in 2018 and includes 4013 units. The targeted return on this planned investment is 14 percent IRR with a 1.6 times equity multiple.
Both of the Bay Area deals were off-market transactions.
Invesco has closed on three other deals for Fund V. These are an apartment development in San Diego and office buildings in Orange County and New York City. One other transaction is in due diligence, and it comprises two multifamily senior housing developments in Washington, D.C. All told the seven investments for Fund V have a total planned investment of $328 million.
Contra Costa County is planning to approve a $75 million commitment into Fund V. It will be part of a total capital raise somewhere in the range of $800 million to $1 billion. Invesco is planning to invest up to $25 million of its own capital into the fund as a co-investment.
The commingled fund has targeted returns of 11 percent levered and 14 percent gross IRRs. Most of the investments for the fund will be with existing assets, since there is a 25 percent development cap. Many of the deals will involve apartments and office buildings. No more than 10 percent of the fund can be invested in senior housing.
The pension fund’s commitment into Fund V is the first of $538 million that the pension fund plans to invest in a value-added strategy going forward, as written in a board meeting document. CCCERA will be evaluating new funds coming out in the near future by LaSalle Investment Management and Boston-based Long Wharf Capital. The pension fund also will be looking to add additional value-add fund managers to its investment program over the next few years.