By Jon Peterson
Since the start of 2021, the multifamily market has been recovering relatively quickly, especially as people have returned to cities and demand for multifamily housing ticked back up. As a result, a number of investors, including Newport Beach-based Sares Regis Group, has began to raise funds in order to expand their footprint in markets where they are active. In the case of Sares Regis, the company has set a targeted capital raise of $500 million for its Sares Regis Multifamily Value-Add Fund IV, according to a board meeting document published by the Teachers’ Retirement System of Louisiana.
The commingled fund will be investing in the western part of the country. This will include California, Oregon and Washington. Some other states where investments will be considered are Arizona, Colorado, Nevada, Texas and Utah. The fund’s target markets are generally characterized by significant employment growth, above-average rent growth and where there are barriers to new supply.
The Registry reached out to Ken Gladstein, the president of Sares Regis Group. He did not respond to an email seeking comment about the fund for this story.
Based on the Louisiana pension fund document, Sares Regis will be making a co-investment to the commingled fund of 1.5 percent of the aggregate commitments up to $7.5 million.
Louisiana Teachers is one of the early investors involved in placing capital into the fund. The pension fund’s commitment was for up to $65 million with the condition that it would amount to no more than 20 percent of the total capital raise for the fund, according to a statement made in a board meeting document by the investor.
Sares Regis Group will be looking to acquire Class B multifamily properties for a value-add strategy. These assets would be in need of a renovation or property enhancements, which Sares Regis would provide. In addition, the manager is hoping to capitalize on demographic shifts in lifestyle choices, which may include a declining preference for home ownership, a strong job market for higher-income wage earners and a lack of quality multifamily units at affordable rents in its target markets.
Fund IV is projected to have a total of 17 investments. The leverage employed will be a maximum of 65 percent loan-to-value at the portfolio level. The property values in the fund will be in the range of $30 million to $150 million with the equity invested per property running from $10 million to $50 million. The expected holding period for each investment is three to five years.
The first three multifamily commingled funds created by Sares Regis Group have been very strong performers. According to data compiled by Louisiana Teacher’s investment consultant, Conshohocken, Pa.-based Hamilton Lane, the initial three funds are all in the first quartile position from a return perspective. Fund I have produced a 16.1 percent net IRR, Fund II came in at 15 percent and Fund III at 16.2 percent.