By Jon Peterson
Irvine, Calif.-based SARES REGIS Group will have Seattle as one of its targeted markets for its new apartment investment fund, SARES REGIS Multifamily Value Add Fund II.
This is a commingled fund for which the manager is still raising capital. The total capital raise could be somewhere in the range of $200 million to $400 million. A company representative declined to comment until there is a final closing on the commingled fund.
One of the investors in the fund was the New Mexico Educational Retirement Board. This investor made a $30 million commitment into the commingled fund and also placed the same level of commitment into the first SARES REGIS fund, the SARES REGIS Multifamily Fund.
We believe there is a regional supply/demand imbalance in an inherently constrained market.
“We are pleased with the performance of the first SARES REGIS fund. We have a good relationships with the manager’s founders and are comfortable with their investment acumen, integrity and sense of duty/loyalty to their investors,” says Mark Canavan, head of real assets for New Mexico Educational.
The investment strategy for Fund II will likely be similar to the first fund. The focus will continue to be on buying existing value-add apartments that it can reposition, aggressively operate and sell at some point in the future.
Canavan sees that now is a good time to invest in value-add apartments on the West Coast. “We believe there is a regional supply/demand imbalance in an inherently constrained market,” he said.
SARES REGIS bought into the Seattle market for its first investment fund, as well. In August of 2013, the manager acquired the 96-unit Sammamish Ridge Apartments in Redmond, which was renamed following the purchase to The Summit.
The markets that Fund II will target include Seattle, Denver, coastal California as well as Portland and Phoenix. The projected targeted returns for Fund II are between 14 percent and 16 percent net IRR.
Seattle as apartment market has been a strong performer both from an average asking rental rate and average occupancy rate perspective. According to data from RealFacts, an apartment data company based in Novato, Calif., the average asking rent has gone up by 7.9 percent over the last 12 months. It moved from $1,625 per month to $1,754 per month from the first quarter of 2014 to the first quarter of this year. Occupancy increased by 2 percent from 92.1 percent to 93.9 percent over the same time period.