Berkshire Group, a Boston-based real estate investment company, has launched its latest multifamily fund – the Multifamily Income Realty Fund.
The family-owned firm’s latest core-plus fund has an initial $500 million target, according to documents from The New Mexico State Investment Council (NMSIC), which committed $75 million to the fund last week.
Berkshire, which manages over $5.9 billion in assets, is targeting a return greater than that of the apartment properties in the NCREIF-ODCE Index, which returned 10.26 percent over the past year, according to a Berkshire investor presentation.
On behalf of the open-ended vehicle, the firm will invest in recently built apartment structures located primarily in coastal areas with high job growth, occupancy rates and barriers to entry. The seed portfolio is comprised of 11 properties valued at $677 million across nine markets. About half of the properties were built since 2013, according to NMSIC meeting materials. In addition to buying newly built properties, the firm also will invest about 20 percent of the fund’s capital toward repositioning older assets.
NMSIC’s investment follows a $50 million commitment in 2012 to Berkshire’s Multifamily Value Plus Fund III, a vehicle targeting $475 million, according to a filing with the US Securities and Exchange Commission. The pension fund noted Berkshire’s pre-seeded portfolio and reduced fees – 65 basis points, versus 115 basis points for investors after the initial capital raise – as part of its rationale for the commitment.
“Specific to this new investment, the Council took into account the Berkshire team’s experience, the manager’s high level of commitment and co-investment in this fund, and the attractive fee break for us as founding investor,” Charles Wollman, the pension’s spokesman, told PERE.
This commitment comes as NMSIC looks to reduce some of its short-term exposure to multifamily investments, according to NMSIC documents. The new multifamily fund shifts part of the pension’s multifamily portfolio from an unnamed generalist manager to Berkshire, which the public institution considers to be “a larger, vertically integrated specialist.”
In meeting materials, NMSIC said Berkshire “has a track record of being able to bring strategic value to multifamily investments over and above that of a generalist investor, via its unique platform and financing relationships.”
The Townsend Group, an institutional real estate consultant, advised NMSIC on the fund commitment.
Berkshire declined to comment for the story.