Graycliff launches small-balance US fund

Through its third commingled vehicle, the Northbrook, Illinois-based real estate investment firm will target office, industrial, retail and multifamily investments in the Upper Midwest and Southeast.


Graycliff Capital Partners is hitting the fundraising trail with its third real estate fund, which will target small-balance commercial real estate equity transactions. The new commingled vehicle, Graycliff Capital CRE Value Add Fund (Fund III), is seeking $75 million in equity and, with leverage of up to 80 percent, could have potential buying power of $375 million.

According to the offering memorandum, Graycliff will target office, industrial, retail and multifamily investments of $5 million or less in the Upper Midwest and Southeastern regions of the US. The Northbrook, Illinois-based real estate investment firm will work with local operating partners for each transaction that can provide market expertise, deal flow and day-to-day management.

Fund III is targeting opportunistic returns, with net returns to investors projected to be in the upper teens. The 10-year vehicle has a projected investment period of three years and a holding period of up to seven years.

Cohen Financial Equities has been hired by Graycliff to serve as placement agent for the fund. For Fund III, Cohen is looking to secure minimum equity commitments of at least $5 million.

Graycliff’s CMBS Value Fund, otherwise known as Fund I, produced in 12 months an equity multiple of 1.5x and an IRR of 54 percent on invested assets. CRE Strategic Opportunity Fund (Fund II) will complete its investments this year, but it already has had multiple full-circle investments within the fund. Fund II returned cash yields of 13.5 percent in 2010 and 16.5 percent in 2011, and Graycliff expects IRRs of 20 percent and equity multiples to exceed 2x.