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Berkshire closes latest US multifamily debt fund on $1.85bn

The Boston-based residential real estate investment firm has closed multifamily credit funds totalling more than $3.3bn this year.


Berkshire Residential Investments, which earlier this year closed its second bridge loan fund on $1.47 billion, has now closed its US residential-focused lending vehicle, Berkshire Multifamily Debt Fund III, on $1.85 billion.

The fund will focus primarily on Freddie Mac Capital Markets Execution B-pieces. It will make additional opportunistic investments in preferred equity, mezzanine debt, B-notes, and discounted notes, explained Michael Coffey, head of capital markets.

Berkshire has closed multifamily debt funds totalling more than $3.3 billion this year to deploy into short- and long-term multifamily debt investments across the US.

“We saw what we believed was an interesting window to take advantage of disruption in the capital markets in first and second quarters of 2020 and have continued to capitalize on the evolving investment landscape since then,” said Jon Pfeil, head of debt investments.

Berkshire Multifamily Debt Fund III was launched in 2020 and had a target of $1.5 billion, according to PERE data. The fund lined up commitments from the Massachusetts Pension Reserves Investment Management Board, which committed $150 million, with another $60 million allocated by the New Mexico State Investment Council, PERE data showed. The Tennessee Consolidated Retirement System contributed another $200 million to the offering.

The fund’s predecessor, Berkshire Multifamily Debt Fund II, had a target of $1 billion, ultimately raising $1.25 billion before its close in 2017, according to PERE data.

Berkshire has been very active in the multifamily lending space, originating loans for its $1.47 billion Berkshire Bridge Loan Investors II fund. The firm passed its fundraising target of $1 billion for the fund, according to data from PERE.

Direct lending

“In addition to our investments in the Freddie Mac K program, we have been very active direct lenders,” Pfeil said.

Berkshire Bridge Loan Investors II is part of the firm’s MF1 lending platform, a joint venture between Berkshire and Limekiln Real Estate. The fund targets senior mortgages, mezzanine debt and preferred equity, originating more than $2.3 billion of loans in 2020.

The fund was also a major contributor to commercial real estate collateralized loan obligations. “We have taken advantage of the opportunity that has presented itself,” Pfeil said.

When originating bridge loans, size, location and sponsor are key, he adds.

“When we think about risk, we are thinking about location, sponsorship and a business plan,” Pfeil said. “Berkshire as a large owner and operator is positioned to be able to understand the implementation of business plans and we are mindful of both the individual credit and how it fits into the securitized product that we are issuing.”

The company sees several factors driving demand for bridge lending, including robust recovery is many US markets. “We continue to see an expanding opportunity set to provide transitional financing for high-quality multifamily assets,” Pfeil said. “We have a robust pipeline and will continue to be active lenders in the space.”