By Jon Peterson
Beverly Hills-based Kennedy Wilson has completed its latest commingled fund capital raise with a total of $500 million for its Kennedy Wilson Real Estate Fund V. This is almost $200 million more than that the $303 million it raised for its last commingled fund, the Kennedy Wilson Real Estate Fund IV, where the capital raise was completed in June 2013.
“We feel very good about the capital raise and the support we have received from our base of investors. This has included a mixture of public and corporate pension funds, some which were numerous Fortune 500 companies,” says Nicholas Colonna, president of fund management at Kennedy Wilson. He declined to give out any names of the investors.
“We feel very good about the capital raise and the support we have received from our base of investors.”
As part of the capital raise, Kennedy Wilson put a lot more of its own capital in Fund V versus Fund IV. The co-investment for the company was $60 million, as compared to $15 million for Fund IV.
Kennedy Wilson will be buying some new properties with the capital for Fund V very soon. It has two properties that it is in the process of buying in the greater Seattle market. The first of these should be happening within the next week or two. Colonna would not give out any other details on these deals at this time.
There is an office property in Bellevue that Fund V has already acquired. This property was purchased in the first quarter of last year. This is one of nine assets that the commingled fund has bought or is in the process of buying. These are a mixture of apartments, office, retail and residential assets with an aggregate purchase price of $365 million and included $140 million of equity from the commingled fund.
Of the nine properties three deals are in Seattle, two in Northern California in Roseville and Granite Bay, and one each in Denver, greater Portland, Santa Barbara and Orem, Utah, a suburb of Salt Lake City. These assets are all part of the targeted West Coast markets that the buyer hopes to find more deals in the future and includes the property types it wants to buy.
The investment period for Fund V lasts until the fourth quarter of 2017. The leverage on the assets in the fund now are at 57 percent. Kennedy Wilson hopes to keep the leverage closed to that on the commingled fund’s portfolio going forward.
The overall investment strategy for Fund V is a value-added one. “We would like to own properties where we can improve them by making minor and not major improvements. We can add value to them in many cases by bringing the current rents up to market when the situation presents itself,” said Colonna. Most of the deals for the commingled fund will have a total purchase price in the range of $35 million to $55 million.
Kennedy Wilson has also been an active seller. A recent example of this was its $158 million sale of the 544-unit The Bridge Apartments in Hayward, Calif. The property was sold to a partnership that included Phoenix Realty Group and Intercontinental Real Estate Corporation. Kennedy Wilson has acquired the property in 2012 for $86.6 million as part of a joint venture with Guardian Life Insurance Company. This was the last property in the venture. Kennedy Wilson planned to make $4 million worth of improvements to the property.