Los Angeles-based Ethika Investments, a private equity real estate firm, is on the fundraising trail for its second vehicle, Ethika Diversified Opportunity Fund II, the firm announced Tuesday.
The firm is targeting $250 million for the opportunistic vehicle. Ethika is the fundraising arm of real estate development firm Laurus Corporation, which was started by brothers Andres and Jean Paul Szita. Ethika, founded in 2012, manages $1 billion in assets. The firm has a 16 percent or more target net internal rate of return and a 2x net equity multiple for the new fund.
Ethika plans to deploy the capital predominantly in hospitality assets through individual and portfolio investments ranging in size from $25 million to $150 million, using a similar strategy to its debut vehicle. The firm deployed about 60 percent of the capital from its first fund in hospitality assets and about 40 percent in office and retail, spokeswoman Dania Jimenez told PERE.
Ethika Diversified Opportunity Fund I, which closed in October at $135 million and is fully invested, has a target return of 22.3 percent and a 2.1x net equity multiple to investors, according to the firm. Using the debut fund’s capital, the firm invested in 17 properties across 13 markets. Ethika’s latest acquisition was a DoubleTree hotel in Pittsburgh, Pennsylvania, which it bought for $40.3 million from RIDA Development in October, according to Real Capital Analytics.
Investors in the first fund were a mix of high-net-worth individuals, family offices, public pensions, foundations and endowments, including the Dallas/Fort Worth International Airport Board, which allocated $5 million to the fund, according to PERE Research & Analytics. About 45 percent of the investors came from overseas, a number boosted by the firm’s Sharia-compliant feeder.
“Nearly six years beyond the last period of significant commercial real estate acquisition, now is an opportune time for Ethika to launch our second fund dedicated to seeking out value-add investments, with a focus on maximizing end values,” Andres Szita said in a statement. “These underperforming assets are still very well-priced with a great deal of upside potential, versus core real estate assets that have been overbought and overpaid for over the last several years.”
The firm did not use a placement agent for either fund.