By Jon Peterson
Irvine and San Mateo-based SARES-REGIS Group has won a new $40 million commitment into its SARES-REGIS Multifamily Value-Add Fund II from the Teachers’ Retirement System of Louisiana, according to an e-mail received from the pension fund.
This investor made the commitment based on the recommendation of its investment consultant, Hamilton Lane. The consultant stated in a board meeting document that SARES-REGIS expects to invest the majority of its capital in the coastal markets of California, while also targeting Seattle, Denver, Portland and Phoenix. These target markets in the western part of the country have demonstrated strong supply/demand fundamentals, which are expected to continue in the near term.[contextly_sidebar id=”ScwftSb0o1fHm0iGflqcK2HWyfQdpsYy”]SARES-REGIS did not respond to phone calls seeking comment for this story.
The main investment focus for Fund II will be to buy existing Class-B apartments with significant value-add potential. The board meeting document from Louisiana Teachers stated that assets will be income producing, and that 35 percent of the commingled fund’s total return is expected to be generated through current cash flows.
Fund II is seeking a $250 million equity raise. Two other investors in the fund are a $50 million commitment from the Ohio Bureau of Workers Compensation Board and $30 million from the New Mexico Educational Retirement Board. The targeted return for these limited partners are a 16 percent gross and 13 percent net IRRs with a 2X gross multiple.
The leverage component planned for the fund is 65 percent. The document from Louisiana Teachers stated that there will be around 18 to 20 investments in the fund with an equity per investment ranging from $10 million to $37.5 million with enterprise values of $28.6 million to $85.7 million. It is projected that assets in the fund will be held anywhere from three to five years.
It was stated in a board meeting document that SARES-REGIS has performed in line with its targeted returns for its first commingled fund. Through March of this year, Fund I has generated a 14.7 percent net IRR. The real estate manager has raised $114 million for its first commingled fund, which is considered to be a 2013 vintage investment fund.