Emet holds first close on Fund II – Exclusive

The University of Michigan, a returning investor, is among the opportunistic fund’s early limited partners.

Emet Capital Management, a private equity real estate firm that invests in distressed debt secured by affordable housing, has corralled $80 million of capital for its second opportunistic fund, PERE has learned.

The New York-based firm declined to comment, but PERE understands it launched Emet Municipal Real Estate Strategy II in January with a $200 million target and $250 million hard-cap. Among its early investors is the University of Michigan’s endowment, which also committed to the debut fund.

Emet’s first vehicle closed on $127 million in May 2016, PERE reported. For the fund series, the firm is targeting a mid-20s gross internal rate of return and a 2x gross multiple. Fund I is returning over 20 percent on a gross basis.

With capital from Fund II, the firm will continue its strategy of acquiring control of multifamily assets through equity purchases and distressed debt secured by assets that qualify for tax-exempt financing. Emet invests nationally in these municipal bond-backed assets, which includes affordable, senior and student housing.

The University of Michigan allocated $50 million to the vehicle, according to investor documents, which detailed the firm’s investment strategy: “Emet identifies opportunities where they can buy such bonds at a discount and install best-in-class property management to bring about a financial turnaround while maintaining the public purpose of the properties. They then realize the returns when the bonds again become performing or the underlying assets are sold or refinanced.”

Fund I’s investor base comprised family offices and endowments. For Fund II, PERE understands the firm is seeking to expand its roster of institutional investors.

The firm’s last publicly-disclosed transaction was the January purchase of the Carriage Hill Apartments, a 337-unit garden apartment complex in Athens, Ohio, for an undisclosed price, according to data provider Real Capital Analytics. PERE understands the firm has not yet deployed capital from Fund II.

Emet was founded in 2012 by Paul Siegel, a former senior vice-president at Fundamental Advisors, and Stefan Baugh, previously a partner at law firm Katten Muchin Rosenman.

Last May, the firm added two executives: chief financial officer Adam Towne, formerly an associate director at financial consulting firm Constellation Advisers, and managing director Michelle Berliner, who founded her own consulting firm and was earlier Brookfield’s head of asset management for the firm’s opportunistic real estate funds.