By Jon Peterson
Irvine and San Mateo-based SARES-REGIS Group is planning a $400 million capital raise for its SARES-REGIS Multifamily Value-Add Fund III, as stated by sources that track capital raising activities by real estate managers in the United States.
SARES-REGIS did not respond to emails seeking comment for this story. This fund raising would be the largest the manager has ever done for a commingled fund. It had raised $304.2 million for Fund II a couple of years ago.
One of its new investors into Fund III is a $30 million commitment from the New Mexico Educational Retirement Board. The limited partners in the fund are projected to receive gross IRRs in the range of 14 percent to 16 percent. It’s projected that 35 percent of the return will be coming from the property’s current income.
Fund III will have a West Coast focus from a geography perspective. Two of its targeted markets will include Northern California and Seattle. Others would include Denver, Portland and Phoenix. The investment strategy will be to invest in Class-B apartment complexes that have significant value-add potential for the future.
The transactions for the fund will be mostly buying existing assets that can be improved in the future. The strategies employed for the assets will include properties that are under-managed, are poorly capitalized, have a distressed owner or capital structure and need deferred maintenance.
All of the properties in the fund will be acquired with a combination of debt and equity. The leverage component planned for the fund is 65 percent. SARES-REGIS will likely be holding onto the assets in the fund for three to five years.
New Mexico Educational sees that SARES-REGIS has produced strong investment performance in its first fund. According to an investment report from the pension fund, SARES-REGIS Fund I has generated a 20.26 percent time-weighted return for three years and a 16.66 percent IRR since inception.