By Jon Peterson
New York City-based Angelo Gordon & Co. is expecting to expand its geographical presence for its value-add commingled fund series to the Pacific Northwest for the first time. The company will provide an unspecified allocation for the region in its Angelo Gordon Realty Value Fund XI, as written in a board meeting for the Mississippi Public Employees Retirement System.
Pacific Northwest and mountain state regions, as well as other innovation markets, are expected to be part of the commingled fund’s investment strategy. At the same time, the manager is planning to deemphasize transactions on assets that are located in the Midwest. Overall, the commingled fund will be looking for assets in the top 20 to 30 markets on a nationwide basis.
The new commingled fund has a targeted capital raise of $3.25 billion with a $3.75 billion hard capital, according to the board meeting document. One of the early investors in the fund is Mississippi PERS, which has a $75 million commitment.
Angelo Gordon will be investing some of its own capital into the fund, as well. The company will put in roughly three percent of its total capital raise up to a maximum of $33 million.
The fund manager will be going against current conventional thinking since it will look to increase its office asset allocation from 20 percent to 30 percent of Fund XI’s portfolio. Mississippi PERS’ board meeting document states that Angelo Gordon believes the negative sentiment surrounding the office sector will lead to increased inefficiencies that may create opportunities to acquire high-quality office assets from owners that are unwilling to invest the capital required to maintain occupancy and maximum value.
The rest of the portfolio for the commingled fund is projected to be split into 25 percent to 35 percent in multifamily assets, 15 percent to 30 percent in industrial properties and roughly five percent to 15 percent each for retail and lodging investments.
The targeted IRR that the commingled fund is looking to achieve is 12 percent to 13 percent net and 16 percent to 17 percent on a gross basis.
Most of the transactions for the fund will be in the range of $50 million to $100 million and will have an equity requirement of $20 million to $50 million. Some of the deals for the fund will be buying existing assets and current real estate debt secured by properties. There may be some investments that involve placing capital into real estate operating companies, as well.