Conundrum closes on C$200m multifamily fund

The Toronto-based fund manager is closing its third fund targeting multifamily assets throughout Canada.

Conundrum Capital is about to close on nearly C$200 million in commitments for its third multifamily fund, PERE has learned.

Although representatives from the Toronto-based fund manager declined to comment, sources familiar with the matter have confirmed that Conundrum Residential Property Income Fund (CRPIF) III is closing on C$195.75 million ($198.7 million, €150.1 million) in equity this month. 

CRPIF III initially was launched in 2009 and had its first close of C$85 million in December 2010. With the exception of one offshore investor, commitments to CRPIF III came largely from Canadian institutions, which include corporate investors, insurance firms, foundations, endowments and public pension plans. The minimum commitment was C$10 million. 

Through CRPIF III, Conundrum is targeting multifamily residential assets in all the major Canadian markets, with a focus on properties in Ontario, Quebec and Montreal. With leverage, the fund is targeting net returns of 13 percent to 15 percent. 

CRPIF III originally was part of a larger investment vehicle, Conundrum Maple Leaf Real Estate Fund, which was split into two separate funds to allow investors to target either multifamily or light industrial assets. Since investor appetite wound up being much stronger for the multifamily strategy, the Conundrum Maple Leaf Real Estate Fund focused exclusively on the apartment sector. Sources say that Conundrum is in discussions about pursuing an industrial strategy but currently has no open industrial fund. 

The Conundrum fund comes at a time when the Canadian multifamily market is appealing to more prospective tenants and investors than at any time in recent memory. Research from CBRE reveals that Canada’s national vacancy rate fell 60 basis points to 2.1 percent in October 2011, which is the lowest vacancy rate since 2008. Rising employment and consumer confidence brought prospective tenants back into the rental housing market, while home sales moderated during the second half of 2011, also supporting rental demand. 

The firm’s previous vehicle, CRPIF II, launched in late 2006 and closed on C$142.5 million in 2007. According to Conundrum’s website, Fund II is fully invested, having acquired 12 high-rise properties in Toronto and Canada's Capital Region (which includes Ottawa, Gatineau and the surrounding regions) comprising 3,013 multifamily units.