By Jon Peterson
San Francisco-based Swift Real Estate Partners has concluded its capital raise for its Swift Real Estate Partners Fund II at $410 million, according to sources that track capital raising activities by significant real estate managers.
Swift Real Estate declined to comment when contacted for this story. The real estate manager had an opportunity to raise even more capital than it did. There was an additional $50 million of capital that it could have been placed into the fund, but Swift made the decision to end the capital raise at this level. The hard cap on the commingled fund was set at $450 million. The investment base for the commingled fund includes a mixture of pension funds, foundations, endowments, foreign investors and investment advisors.
The total capitalization of Fund II will likely be somewhere in the range of $1.03 billion. This would happen if the commingled fund places 60 percent debt on the portfolio that it ends up accumulating. The investment period runs for three years, and it started in the first quarter of this year. The total life of the commingled fund runs from eight to 10 years long.
Swift has already placed four properties into the commingled fund with a fifth one coming later this month. The initial assets in the fund are located in Seattle, Portland and Los Angeles. There will be a second property in Seattle that will be closed by the end of June. The first Seattle property for the fund was the $18.25 million acquisition of the 68,000 square foot Gateway Two office building in Bellevue.
The capital raise for Fund II represents a strong increase from the amount of capital that Swift raised for its initial commingled fund product. The real estate manager had raised $330 million for Swift Real Estate Partners Fund I and wrapped up the capital raise in March of 2014.
Swift will continue with the same strategy for Fund II that it had started with on Fund I. This is to buy a mixture of existing office and industrial assets. All of the properties that it tries to acquire will likely have some sort of a value-add component. This could include strategies like leasing up empty space and fixing capital issues or structural problems.
The targeted return for Fund II is projected to be a mid-teens leveraged IRR. Swift looks to buy assets that are located in the San Francisco Bay Area, Seattle, Portland and Southern California.