Archstone, the troubled Denver-based apartment REIT, has launched a new club fund targeting apartment buildings in core US markets and already has received more than half of its $500 million target from itself and two other investors.
According to sources familiar with the situation, Archstone Multifamily Partners has closed on $300 million of equity. Allianz Real Estate, the real estate arm of German financial institution Allianz, and the Canada Pension Plan Investment Board (CPPIB) have committed $100 million each to the vehicle, while Archstone kicked in $100 million of its own equity. The REIT is seeking a total of $500 million in commitments by the end of the year.
Archstone Multifamily Partners will invest in apartment properties in core markets such as Boston, Los Angeles, New York, San Francisco, Seattle and Washington DC. Sources have noted that the club fund, which is targeting a return of 11 percent to 13 percent, would have $1.5 billion of buying power with leverage.
“We have a strategy of going after core properties in key markets,” said a CPPIB spokesperson on why the C$153.2 billion (€110.2 billion, $148.8 billion) pension plan committed to the Archstone vehicle.
“Allianz is expanding its real estate investments globally and attempting to diversity its investments,” said James Stolpestad, chief executive of Allianz Real Estate of America, on why his firm invested in the fund. “US multifamily is a compelling sector to make investments. When we evaluated our choices, and Archstone offered a compelling alternative.”
Allianz has a “significant investment in multifamily” in Europe, so the firm is eager to expand into the US, Stolpestad noted. Indeed, this investment marks Allianz's first foray into the US multifamily sector.
The club fund comes at a tumultuous time for Archstone, as its owners currently are figuring out what to do with the apartment giant. Its owners — the bankrupt Lehman Brothers, Barclays and Bank of America — are narrowing down the options whether or not to sell off the REIT, find an investor or file for an initial public offering. Archstone and its owners declined to comment.
In August, CPPIB announced that it had acquired a 40 percent interest in two multifamily properties owned by Archstone for $108 million through a joint venture with Allianz, which also acquired a 40 percent stake. That deal also sparked the beginning of a three-year development programme between Archstone and CPPIB.