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Berkshire To Seed New Investment Fund with Assets in San Jose and Seattle

California State Teachers Retirement System, Los Angeles, Resmark, ResCal Investments, San Francisco Bay Area, Seattle, CalSTRS

By Jon Peterson

Boston-based The Berkshire Group has seeded its new investment fund with properties in San Jose and in the Seattle area, according to a board meeting document from the New Mexico State Investment Council. The name of the commingled fund is the Berkshire Multifamily Income Realty Fund.

The names of the properties in San Jose and in the Seattle area were not specifically identified in the board meeting document. The property in San Jose is a newly developed property. It was constructed this year as part of a build-to-core strategy, and the complex totals 293 units. It has a gross asset value of $145 million, as stated in the document from New Mexico. Through July of this year, the property was 95.3 percent occupied.

The complex in the Seattle area is located in Redmond, Wash. This is a property that was developed last year and it will be placed into the fund as a core acquisition. This asset has 134 units and has a gross asset value of $50 million. The complex was 91.6 percent occupied, as of July 2015.

The Berkshire Fund has made the San Francisco Bay Area and Seattle as two of its initial targeted markets. The real estate manager stated in a board meeting document for New Mexico that these markets have strong job growth and diverse economies supported by demand from a growing population and have barriers to entry with high occupancy and a liquid transaction market.

Berkshire did not respond to a phone call seeking comment for this story. The real estate manager will be seeding a total of 11 properties into the commingled fund. This portfolio will have a value of around $677 million. The assets outside of San Jose and Seattle are located in Denver, Atlanta, Dallas, Tampa, Houston, Towson, Md. and Charlestown, Mass.

This commingled fund has an open-ended structure. This means that the fund will always be open to new investors committing additional capital into it. The initial capital raise for the fund is projected to be in the neighborhood of $500 million. Berkshire will be making an approximately $134 million co-investment into the fund through the contribution of real estate. One of the initial investors in the fund with a $75 million commitment is the New Mexico State Investment Council.

The Berkshire Fund has a core/core plus investment strategy. Most of the fund will be spent on buying recently built apartments that are equipped with contemporary amenities and located in close proximity to renowned office and grade A retail investments. Around 20 percent of the fund will be to invest equity in new development projects, forward commitments on properties to be constructed or value-add opportunities on existing assets that can be repositioned.

Berkshire did state in a board meeting document with New Mexico that it has some other deals in its pipeline that could be added to the fund at a later date. Two of these properties are located in the greater Seattle market. One is a property in Seattle that was completed this year. This is a 248-unit complex that has a potential equity investment of between $80 million and $90 million. The other is a 208-unit complex also built in 2015. It has a potential equity investment of $40 million to $45 million.