AvalonBay closes $400m fund

The multifamily investor has closed its second value-added fund after eight months of fundraising. One investor committed $75m to the vehicle.

AvalonBay Communities has closed its second multifamily fund, AvalonBay Value-Added Fund II, on $400 million.

The Alexandria, Virginia-based real estate investment trust, which also raises private equity funds, said it raised $75 million from one new institutional investor.

AvalonBay committed $125 million of its own GP capital to Fund II. AvalonBay’s predecessor fund, Value-Added Fund I, raised $330 million from eight institutional investors, including $50 million of GP co-investment, in 2005.

Fund II is a 10-year vehicle that has yet to make any investments, the firm said in a statement. It will target multifamily properties in the Northeast, Mid-Atlantic, Midwest and West coast regions of the US. The fund’s investment period runs until August 2010.

Yesterday, New York-based real estate research firm Reis said the US multifamily investors sector saw the national vacancy rate rise to 7.2 percent in the first quarter of 2009, the highest rate since 2004.

Rents, though, also declined as excess inventory hit the market. In the first three months of the year, effective rents – which factor in free rent and other concessions offered to tenants – fell 1.1 percent against a decline in landlord asking rents of 0.6 percent. Reis research director Victor Calanog said the fall in asking rent growth was the largest decline ever seen since Reis began reporting in 1999.