BIG closes largest dedicated multifamily fund ever

The US firm has smashed previous records on the strength of its prior performance, including a 30.4% return for Bridge Multifamily Fund IV.

Bridge Investment Group has closed its fifth flagship value-add multifamily fund, Bridge Multifamily Fund V, with $2.26 billion in capital commitments, PERE has learned.

Eclipsing its $2 billion target, the fund attracted capital from both institutional clients and high-net-worth capital, with 30 percent of the fundraise from new investors. The Salt Lake City-headquartered manager told PERE that 44 percent of the fund was from non-US investors.

BIG becomes the second manager in as many weeks to set a record in fundraising for a specific property type. The firm follows Saratoga Springs, New York-based Prime Group Holdings’ $2.5 billion fundraise focused exclusively on self-storage. Bridge Multifamily Fund V has also surpassed the previous closed-end recordholder in the property type, Miami-based Lennar Corporation’s $2.2 billion Lennar Multifamily Venture, which was raised in 2014, according to PERE data. The vehicle also eclipsed its predecessor fund, Bridge Multifamily Fund IV, which closed on $1.6 billion in 2018.

Jonathan Slager, chief executive officer of BIG, said that investors felt comfortable committing to Fund V based on the firm’s track record in the sector. Fund IV has returned a net 30.4 percent to investors, following $310 million in realized investments, per BIG’s latest 8-K filing from Q3. Value-add funds typically have net return targets between 14 percent and 16 percent.

Another reason for the strong investor support is that fundamentals remain strong in multifamily despite uncertainty in the broader market. “Most investors believe in the supply-demand imbalance in favor of demand in the housing space broadly and specifically in multifamily,” Slager said. “I think that really drives people to make an investment.”

BIG has deployed between 25 percent and 50 percent of the fund so far. Slager acknowledged the debt markets were making it difficult to transact currently but that the market will recover once there is visibility on where interest rates will settle.

“There is a fundamental cadence to the amount of transaction volume that takes place in the multifamily market,” he said. “When you have slower periods, they’re followed by busier periods.”

Slager said that the firm underwrites its properties from an unlevered perspective, meaning that the return has to make sense without debt. He said a number of smaller firms will struggle because of floating rate debt they have on their properties. Some of those loans maturing should create buying opportunities for BIG in the next two years.

Slager said BIG is moving away from floating rate debt almost altogether in the current rising rate environment. Historically the firm has used a blend of floating-rate and fixed-rate debt.

BIG has also acquired some assets using only equity, also as a response to the market, with plans to add debt later. The firm could continue that practice with the capital from this fund, Slager said.