By Jon Peterson
Another investment firm is looking to raise considerable amount of funding to shore up cash for acquisitions in the multifamily market. San Diego-based Fairfield Residential is in the process of establishing the Fairfield Create Core Multifamily Fund, according to sources familiar with the investment firm’s strategy. This investment entity will only be investing in new apartment development projects around the United States including the San Francisco Bay Area and Seattle.
Fairfield Residential did not respond to an email seeking comment for this story.
The total capitalization on the fund will be around $1.5 billion, which will be achieved by by the fund’s projected equity of $750 million. Fairfield’s fund is also planning to have leverage of 60 percent loan-to-cost during the construction period of an asset, and 50 percent once the asset becomes stabilized in the portfolio.
Around eighty percent of the Core Multifamily fund will be owned by the New York State Common Retirement Fund, as stated in an email from this public pension fund. This investor has approved a $600 million equity investment into the fund, which makes it a cornerstone investor in the fund. There will be one other institutional limited partner in the fund, however that investor has not been named.
The pension fund is planning to keep its investment be in this real estate portfolio for a long time. The targeted returns for its investment are 9 percent to 11 percent net IRRs based on a 10-year holding period.
New York Common is projecting the fund will hold on to the properties through multiple economic cycles. Any developments that would break ground in the immediate future will be delivering units for rent in 2022 or 2023, a timeframe that most economists believe will be a period of outsized economic growth and pent up apartment demand.
The pension fund will have full discretion on all new investments allowing for it to control the pacing of the investments and market selection. This means that Fairfield will need to get approval from New York Common for each transaction for the fund.
Fairfield has been an active investor in many markets in the San Francisco Bay Area. Earlier this year, the buyer/developer sold the 315-unit 808 West Apartments in San Jose for $184 million to Northwest Mutual. Its other active submarkets in the Bay Area region include Vacaville and American Canyon.
Fairfield has also been a recent player in Seattle. In 2019, it sold the Mark on Fourth apartments in Everett totaling 311 units for $76 million to Mill Creek Residential Trust. Some of its other active markets in greater Seattle include Redmond and Renton.