HQ Capital holds $108m first close – Exclusive

The firm, which sources capital largely from German investors, is seeking to raise $100m more than its last opportunistic fund.

HQ Capital has corralled $108.2 million for its latest US multifamily fund, PERE has learned.

The firm, which declined to comment, launched RECAP Opportunity Fund III in the fall with a $250 million target, PERE previously reported. The Frankfurt, Germany and New York-based alternative investment manager raised $152 million for the predecessor vehicle, just above its $150 million target.

For the opportunistic fund series, HQ invests via joint ventures in ground-up development and value-added investments in properties throughout the US.

“We continue to see strong interest from investors for US multifamily real estate,” Paul Doocy, the firm’s co-head of real estate, told PERE last summer. “Compelling demographics, steady job growth and relative affordability are the key drivers of this strategy.”

The firm plans to close Fund III, which does not have a hard-cap, at the end of 2019. In the fund’s first close, about 90 percent of commitments came from German institutional investors and family offices, similar to the investor composition in the series’ earlier funds.

HQ targets a 12-14 percent net internal rate of return for the vehicles. As of the end of December, the firm’s 188 realized investments had generated a 21 percent gross IRR.

With capital from Fund III, HQ has purchased one asset, with two under contract and three in the pipeline.

The firm’s latest publicly-disclosed investment was the April formation of a joint venture to develop Central and Columbus, a five-story, 223-unit multifamily building in Phoenix, Arizona. HQ is partnering with Las Vegas-based developer Fore Property Company for the development, which the two parties purchased for $5.2 million, according to data provider Real Capital Analytics. The deal marks the 11th investment for Fund II, which is now fully committed.

HQ was founded in 2015 through the merger of three investment managers: Auda, Real Estate Capital Partners and Equita. Real Estate Capital Partners closed RECAP Opportunity Fund in December 2014 on $92 million. HQ’s anchor investor is the family office of Harald Quandt, a German industrialist who died in 1967.

HQ managed $11 billion overall as of December 31, including $4 billion in US real estate. The firm is the eighth-largest German investor in US real estate, according to RCA.