Banner Apartments has closed on its first batch of commitments for its second real estate fund, Banner Essex Strategic Apartment Fund II, raising $35 million of its $50 million target. The vehicle, which was launched early this year, will target acquisitions of value-added apartment properties of 150 units or larger in the Midwest and Sun Belt markets.
Fund II marks the first time that Banner plans to partner with institutional investors through sidecar or joint venture structures on investments requiring $10 million or more in equity. In such transactions, the fund will provide 10 percent to 20 percent of the co-investment equity required for each acquisition. Deals that call for less than $10 million likely will be funded entirely by Fund II.
“We’re trying to raise our investor profile,” said John Nikolich, Banner’s head of capital markets and investor relations. He noted that the firm’s investor base currently consists of family offices and distribution networks that control multiple family offices, but the longer-term goal is for the firm to raise its first institutional real estate fund. The co-investment structures also will enable the vehicle to build a more diversified portfolio by acquiring additional assets, while the promoted interests from the joint venture partners could potentially boost returns to the fund investors.
Fund II, which is seeking returns of 12 percent to 15 percent, has not yet invested any of its capital to date. Banner currently is in negotiations on a property acquisition in Texas on behalf of the vehicle.
Banner previously raised $41.4 million through its first fund and a sidecar vehicle in 2008, investing all of the capital to acquire 1,270 multifamily units for a total of $117 million between 2009 and 2011. The firm, which was founded in 1989, currently owns more than 5,600 units valued at approximately $500 million.