Astrum Investment Management has launched its debut fund targeting mixed-use properties within Southern California. According to an announcement from the Los Angeles-based emerging fund manager, Astrum Fund I is a $50 million closed-ended predominantly core vehicle that would also deploy a value-added strategy.
Astrum Investment Management's founding managing director Nevin Sanli told PERE the firm is seeking to raise $60 million in credit in addition to the $50 million in equity commitments for the vehicle which are expected to come from high net-worth individuals, fund of funds, institutional investors and family offices in the US, Europe and Turkey. The firm expects a first close of $10 million in November and a final close by mid-2012. It is currently not using a placement agent although Sanli said that could change as it is currently in talks with some agencies.
The fund, for which Astrum will deploy a sale and leaseback strategy, is targeting properties with single tenants. Astrum's business model is to purchase the property and hold it for up to 20 years. For the first five years, Astrum will let the occupying firm continue to manage and maintain the building, then it would give the occupying firm the opportunity to buy back the property. If the firm chooses not to repossess the property, Astrum would increase the rent and hold onto the asset for another 15 years before selling it to a third-party. Astrum is targeting an IRR of 15 percent over the initial five-year period, in line with typical value-added fund returns, and an 8.5 percent preferred return to investors.
Sanli said the fund would enable firms occupying warehouse-style headquarters to obtain capital without losing control of their space. “In this environment, even companies with good cashflow can't borrow, or they have to borrow at 18 percent,” said Sanli. “This is a way for firms to free up some capital yet still stay in their space.” In turn, Astrum receives revenue on these properties for five to 20 years. Through the fund, the firm is planning to invest in roughly 10 properties within a “one-hour flight time from Los Angeles”. This includes Los Angeles, San Diego, Sacramento and Silicon Valley.
Sanli, a long-time consultant, formed Astrum in the fourth quarter of 2009. Sanli is also the president and co-founder of Astrum's sister company, Sanli Pastore & Hill, an investment analysis firm founded in 1992 with offices in Los Angeles and Sacramento.