By Jon Peterson
San Francisco-based DivcoWest Properties has just started the capital raising process for its next commingled fund, the $1.5 billion DivcoWest Fund V, according to sources that track the equity fundraising for commingled funds on a national basis. The private placement memorandum for the fund is nearing completion.
A company representative for DivcoWest declined to comment when contacted for this story.
The capital being raised for the new fund will represent a significant increase from the manager’s last commingled fund raise. DivcoWest raised $976 million of equity capital for its DivcoWest Fund IV. This fund raising exercise was completed in May of 2014.
The total capitalization of Fund V is targeting a figure of $4.29 billion, which comes out of the fund’s projected portfolio leverage of around 65 percent.
The greater San Francisco Bay Area, which includes Silicon Valley, and Seattle are projected to be two of the commingled fund’s targeted markets. The other markets around the country where DivcoWest would like to buy in would include Los Angeles, Portland, Austin, Raleigh, New York City and Washington, D.C.
The targeted returns for the commingled fund are projected to be in the range of 10 to 13 percent net IRR, according to sources that are aware of the investment fund. DivcoWest will be placing some of its own capital into the commingled fund, although that figure is not known at this point. For its Fund IV, the manager made a $15 million co-investment into the fund, which came to roughly 1.5 percent of Fund IV.
DivcoWest has typically attracted capital from some of the nation’s largest public pension funds into its commingled funds. Some examples are California State Teachers Retirement System, Oregon Public Employees Retirement Fund, New York City Employees Retirement System, Massachusetts Pension Reserves Investment Management Board and San Francisco Employees’ Retirement System.
Fund V is being structured as a value-added commingled fund. It will be mostly investing in office buildings and R&D properties. The transactions for the fund will be investing in existing properties that have a value-add component and placing some equity capital in new development projects. Most of the assets will be geared for technology type tenants.