Boxer Property Management has launched its first institutional real estate offering, Boxer Property Fund III. The vehicle, which is targeting $100 million in equity, will focus on value-added, financially distressed, or mismanaged office assets that can be acquired below replacement cost and where the Houston-based firm’s management platform and experience can provide a competitive advantage.
Boxer expects to hold a first close for Fund III by the end of July and a final close by the end of the year, according to director of acquisitions Brad Nichol. The fund has seen interest from such investors as family offices, high-net-worth individuals, university endowments and fund of funds. The firm’s first two offerings solicited investments solely from friends and family investors.
The fund will focus on office buildings, including those with minority portions of retail or logistical space in the markets surrounding gateway cities in California, Connecticut, Illinois, Massachusetts and New York. For its previous funds, Boxer focused on markets in the Sunbelt region, but it chose to shift its efforts with Fund III in order to capitalize on the disparity between core Class A office space in the major markets and Class B office supply in secondary locations. The firm is targeting a 20 percent net IRR for the vehicle and a 2x equity multiple.
“We see the investment opportunities just outside the major cities to be very attractive and, in order to invest there, we wanted to expand our scope and accept outside money for the first time,” Nichol told PERE.
Fund III has a budget of $5 million to $30 million per asset, which includes the repositioning costs to perform upgrades to create modern and collaborative spaces. “We’ve had great success with what we call ‘Boxer work style,’ which takes a page from Silicon Valley,” said Nichol. “It includes large common areas with small offices, small conference rooms and shared spaces where tenants can get together. We’re making that concept available to smaller tenants.”
Technology has been an important influence on Boxer’s approach since current president and chief operating officer Justin Segal joined in 2006 after having worked in Silicon Valley. “The thing that makes Boxer different is that we’re running technology like you’d expect from a tech firm or an online company,” Nichol commented. The firm’s online leasing platform has grown 700 percent since 2010, now far outpacing its traditional method of using outside brokers to bring in tenants.
Boxer and its affiliates have been acquiring and managing office buildings since 1992. As of year-end 2013, the Boxer portfolio consisted of 175 properties totaling over 18.5 million square feet of office and retail space, as well as four hotels totaling more than 1,000 keys.