By Jon Peterson
San Francisco-based Swift Real Estate Partners has completed its final capital raise of approximately $503 million for its Swift Real Estate Partners Fund III, according to sources that are familiar with the firm’s capital raising activities.
The fund manager was able to exceed its targeted capital raise of $500 million for the fund. It will have a total capitalization for the fund of $1.4 billion with the use of some leverage on the portfolio that will be compiled.
There is one asset in the fund that is located in the San Francisco Bay Area region. This was the $56 million purchase of 5215/5225 Hellyer Avenue in San Jose. This acquisition closed in mid-March of 2020. The transaction produced a cap rate of 8.25 percent based on the property’s current net operating income. The asset was purchased with 50 percent leverage, and the leases in the property have a weighted average remaining lease term of 3.5 years. Other properties in Fund III now are located in Bellevue, Washington and Southern California.
Swift declined to comment when contacted for this story.
Fund III, like the two previous investment funds created by Swift, will have a value-added investment strategy. Overall, the manager looks to acquire existing office and industrial assets that it can improve over time through the leasing up of empty space or investing additional capital to physically improve the property.
It is likely that it will be a while before any additional transactions are completed by the manager. This is mainly due to the economic impact of coronavirus, which has brought new investment and sales activity to be nearly non-existent.
Swift had been working on the potential acquisition of 1161 Mission Street in San Francisco, according to sources that track the sale of office buildings in San Francisco. There is no indication at this time if this transaction will be completed or what the final outcome of the sales effort will be. This property is owned by an Asian-based investor. Some investors may have reservations with the property given that one of the tenants in the property is WeWork, which is going through financial issues of its own.
Swift seems to be in a good spot with its overall investment portfolio. The real estate manager completed the final sale of all the properties in its Fund I portfolio during the first quarter of this year. It has also received 97 percent of the rent due for the month of April from its tenants on its existing portfolio, according to industry sources.