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Bell Partners raises $930m for debut core strategy

The North Carolina-based apartment specialist closed on a fund for the strategy, but the bulk of the capital was raised through co-investment vehicles.

Bell Partners: enhancing its core capabilities

Bell Partners, an apartment specialist that has long favored value-add strategies for its commingled funds, has closed on a total of $930 million for its debut core strategy.

The North Carolina-based firm closed Bell Core Fund I on $230 million, exceeding its $200 million target, PERE has learned. The remaining capital was raised through a series of related co-investment vehicles.

Bell launched the strategy last year at the behest of investors that wanted extended exposure to US multifamily at a time of broader market uncertainty, chief executive Lili Dunn told PERE. Previously, Bell’s core activities were limited to joint ventures and separately managed accounts.

“We have a long history of investing in core assets, but this provides a more programmatic approach and one that is complementary to our value-add series,” Dunn said. “This will allow us to meet the objectives of our clients through a full market cycle.”

Unlike most core vehicles, which are open-ended, Dunn said Bell and its investors deemed a closed-end approach to be most attractive for the new strategy. She noted that the life cycle of the fund will be 12 years, which is longer than the typical eight years for the firm’s value-add strategies. Some of the sidecar vehicles also have a longer duration, she said, adding that Core Fund I could be converted into an open-end structure later.

The fund’s investors include a variety of institutions in the US and abroad, Dunn said, adding that the “vast majority” of the equity came from investors with pre-existing relationships with Bell. That list includes the Montana Board of Investments, which committed $80 million to Bell Core Fund I, according to the PERE database.

Dunn said the core fund will be used to enhance Bell’s diversification within its existing target markets: Atlanta, Austin, Boston, Charlotte, Dallas, Denver, Central Florida, South Florida, Nashville, Raleigh, Southern California, the San Francisco Bay Area, Seattle and Washington, DC. Bell’s income-oriented vehicle will invest across the spectrum of apartment types, she added, from affordable offerings in lower-density suburbs to high-end properties in infill locations.

Leverage for Core Fund I is capped at 50 percent – compared with 65 percent for its value-add vehicles – and the targeted total return is 100 to 150 basis points lower than Bell’s higher-risk funds, Dunn said.

So far, Bell has deployed half of the fund – roughly $900 million including debt – to buy eight properties. It has focused on Sunbelt markets in North Carolina, Georgia, Texas and California, while also dabbling in San Francisco and Seattle.

While rent regulations are a concern for certain large coastal markets, Dunn said Bell has been more willing than some of its peers to invest in promising sub-markets of major cities.

“Eventually, these markets will open up, everything goes in a cycle,” she told PERE. “We’re aware of the near-term softness in urban areas and pricing risk accordingly, but we’re also positioning for outsized returns.”

Bell has been leery of oversupply and price inflation in certain suburban markets as institutional investors and managers have clamored for deals. As a result, Dunn said her firm has been an “aggressive seller and judicious buyer” in those areas.

Dunn credited the overall uncertainty around office, retail and hotel assets with driving the sudden uptick in demand for apartments. She said demand is likely to remain strong for the foreseeable future as investors look to ride out future economic volatility while also hedging against inflation through rent hikes that are tied to the Consumer Price Index.

“A key pillar of apartment demand is the need for housing,” Dunn said. “Regardless of the broader economy, securing shelter is always a key, indispensable priority.”