Henderson Global Investors is determined to tap what it sees as the “best positioned” sector in the US by raising a $400 million fund.
The UK-based asset manager wants to corral at least $100 million by the end of the year for CASA Partners US Multi-Family Housing series – CASA V.
In a statement, it predicted the fund to become the largest in its series of multi-family vehicles to date, eventually winning commitments of $400 million if its hits its target.
It is the fifth in a series of Henderson-managed housing funds that promise investors “value-enhancing strategies” with experience in low-cost tax-exempt bond financing. Target returns for the vehicle are expected to be between seven and nine percent a year over the fund’s five year life for unlevered apartments. It will target between 11 and 13 percent for apartments benefiting from tax-exempt bond financing.
CASA V will utilise what it calls a “three tiered” investment strategy targeting apartment properties with 200-plus units in urban and suburban markets with strong demographic and economic trends. The strategy involves employing “value added and conventional investments in tax-exempt bond-financed apartments”, repositioning opportunities to enhance both direct and joint venture returns and taking advantage of distressed conditions found in the prime core apartment market.
These conventional apartments may also be used to balance the fund from a loan-to-value, geographic or strategic perspective, Henderson said.
Henderson said it regarded the US apartment market as the best-positioned sector of the four major US property types over the next five years. It argued: “Apartments have historically proven less volatile than other property sectors, and core apartments are likely to offer attractive total returns with a strong income component.”
Henderson added that the asset class had become more attractive to institutional investors over the past 25 years because of its stable cash flows, diversification benefits and “abundance of advantageous debt financing”.
Sue Motowidlak, co-portfolio manager of CASA V said: “It is exciting to be able to be an active buyer at this point in the cycle. Unlike the period of the 1980’s and the early nineties, this time around, multi-family is not overbuilt. The overall economy will improve and, in most markets, multi-family will recover quickly. Maintaining occupancy, price point and expense controls are the three main ingredients of weathering this storm.”