By Jon Peterson
San Francisco-based Swift Real Estate Partners is nearing the completion of its $400 million capital raise and it plans to conclude fund raising activities for Swift Real Estate Partners II in the second quarter. “I would expect to have all of the capital raised sometime during the second quarter,” confirmed Christopher Peatross, founder and president of Swift Real Estate Partners.
The real estate fund manager has already received signed investor commitments of $222.5 million and has a pipeline of another $130 million of commitments, which it is expecting this week. Swift began the capital raise for the second fund last September when the firm established a new commingled fund as a follow up to the manager’s Swift Real Estate Partners I where it raised $329 million. More than 90 percent of the investors in the first fund are expected to re-invest in Partners II.
“We are particularly excited about these office-market acquisitions. They are very unique properties and have great inherent value that can be realized.”
The hard cap for Partners II is $450 million. Peatross declined to state the names of any of the investors in the commingled fund, stating that the investor base for both of its commingled funds includes U.S. pension funds, endowments, foundations, foreign investors and investment advisors.
Swift has a value-add investment strategy for its funds. “We like to buy properties where we can add value. Those issues could range from vacancy, capital issues or structural problems,” said Peatross. The targeted returns for its investment funds are a mid-teens leveraged IRR. The leverage placed into Partners II is planned to be in the neighborhood of 60 percent. The investment period for its funds are three years, and the firm has a five-year time period to sell any of the assets that it buys.
Swift would like to buy a combination of office buildings and industrial properties. Most of its assets for both commingled funds have been office buildings. “We have felt that the risk adjusted returns have been better for office than industrial. This doesn’t mean we won’t be buying any industrial in the future,” said Peatross.
Swift has a regional investment focus. It wants to invest in existing assets that are located on the West Coast. Its target markets are the San Francisco Bay Area, Southern California and the Pacific Northwest.
Swift has closed on two transactions for Partners II so far. The firm has paid $18.25 million to acquire the 68,000 square foot Gateway Two office building in Bellevue, Wash. located at 915 118th Avenue Southeast. It also paid $12.25 million to acquire office assets in Portland. These were the four-story Merchant Hotel building, the two-story Norton House building and the two-story Captain Couch building. All of these assets are located in the Old Town sub-market of Portland. “We are particularly excited about these office-market acquisitions. They are very unique properties and have great inherent value that can be realized,” said Peatross.