Greystar Real Estate Partners has closed its 10th value-add US multifamily fund on $2 billion, PERE has learned, making it the largest vehicle of its type closed to date, according PERE data.

Launched in 2018, Greystar Equity Partners X surpassed its target of $1.5 billion and was oversubscribed, leading the South Carolina-based manager to turn away potential investors to stay within its $2 billion hard-cap. The firm aims to invest 60 percent of the fund in US gateway cities or their surrounding suburbs and 40 percent in secondary markets.

GEP X appealed to a mix of institutional investors from the US, Europe and Asia, Kevin Kaberna, executive director of Greystar’s US Investment Management division, told PERE. Roughly two-thirds of the committed capital came from prior investors in Greystar’s other funds. The firm’s in-house investment relations team executed the fundraise – the group’s first in the value-add space.

Greystar surpassed the previous fund in its flagship series, GEP IX, which closed on $1.25 billion in 2017. With its latest haul, the firm has also surpassed San Francisco-based Carmel PartnersInvestment Fund VII, which previously held the record for largest US value-add multifamily fund at $1.28 billion.

Greystar will target an internal rate of return in the mid-teens for GEP X. The firm’s previous fund, GEP IX, delivered a one-year return of 5.83 percent, as of July 2018, according to the South Carolina Retirement System Investment Committee’s 2018 annual investment report. The fund outpaced the index for US apartments, which delivered an annualized return of 5.39 percent over the past four quarters, per NCREIF’s Property Index. Kaberna said the fund would use “moderate” leverage but declined to share an exact loan-to-value target.

In terms of investment goals, approximately two-thirds of the fund’s gateway markets allocation will be focus on suburban locations, Kaberna said. Greystar sees opportunity in  submarkets tied to the rising affordability crisis in cities such as Seattle and San Francisco. The firm will acquire underperforming assets and aim to boost rents while staying below the top rates charged for new developments, he explained.

Managers have closed on more than $7.4 billion of multifamily-specific capital for commingled, blind-pool funds through the first three quarters of 2019, according to PERE data, with most of that targeting North America, reflecting a growing demand for the asset class. As more investors turn to apartments for stable returns, Kaberna said the market for acquisitions has grown more competitive, especially for portfolio buys, which he sees trading at a premium. So far, Greystar has closed on more than six assets for GEP X, he told PERE.

“The market feels like it is a little tighter recently, given the amount of capital in the system, but we feel, given the positive fundamentals of multifamily and the resiliency of cashflows, multifamily value-add investing is still a great strategy,” Kaberna said.