Gerding Edlen, a Portland, Oregon-based real estate developer, has closed its debut fund and is ready to launch its second. Gerding Edlen Green Cities I, a $183 million value-added vehicle, was used to target distressed yet sustainable multifamily assets in the US for the purpose of repositioning, refitting and reselling them.
Molly Bordonaro, senior vice president at Gerding Edlen, said that through the fund, the firm targeted assets in the “‘24-7’ cities of growth in seaboard markets,” which included Seattle, Portland, San Francisco and Los Angeles along the west coast, and New York, Washington DC and Boston along the east. When the fund was initially launched Gerding Edlen had the ability to invest in office properties on behalf of the vehicle, but it became clear to the firm “that the opportunity for the apartment side was extremely strong” and so shifted its focus only on multifamily assets.
With regards to the structure of its investment vehicles, the firm said. Bordonaro said: “We’ve been in the business managing separate accounts for 15 years. It was a natural progression to start our first fund.”
Launched in December of 2009 and closed in December 2011, Green Cities I became fully-invested during that timeframe. The firm has completed two deals in Seattle, one in downtown San Francisco, two in Los Angeles and two in Boston on behalf of the fund.
The fund, which required a minimum equity commitment of $5 million, is targeting a net IRR of 16 percent. Its investors include public, corporate and Taft-Hartley pension funds, foundations and endowments.
Looking ahead, Gerding Edlen intends to launch a follow-up vehicle, Gerding Edlen Green Cities II, later this quarter. Although Bordonaro declined to comment on details regarding Green Cities II, sources say that it will follow the same strategy as Green Cities I, but will most likely be targeting more capital.
“With the demographic shift in demand and a lack of supply, we saw a really strong opportunity for apartments,” said Bordonaro. “We could do retrofits to meet the increasing demand. The fund gave us the ability to execute such a strategy. It’s been a very successful strategy.”