Lingerfelt Commonwealth Partners is preparing to hit the fundraising trail with a new value-add real estate fund, Lingerfelt Commonwealth Value Fund II. The firm is targeting $75 million for the new vehicle, which is expected to be launched in January.
Fund II’s targeted size is more than double that of its debut fund, which closed on $30 million of capital, primarily from high-net-worth investors and two smaller foundations. PERE understands, however, that one reason for Fund II’s larger equity target is to be able to better attract larger institutional investors. Lingerfelt declined to comment.
The new vehicle will focus on select secondary and tertiary markets in the eastern half of the US, particularly the Mid-Atlantic and Southeast, according to marketing documents sent to investors, and seen by PERE. Fund II will pursue investments in value-add Class A and Class B office; medical office; hospitality; industrial; healthcare; retail and multifamily real estate. Targeted properties will include assets that can be acquired at prices below replacement cost; are mismanaged; are non-core assets or are in non-core markets for institutional owners that are seeking to harvest investments or reposition their portfolios; have financially distressed owners; are well-located; and are positioned for capital appreciation.
Fund II is seeking a gross internal rate of return of 14 to 18 percent over a three-to-five-year hold period, the marketing documents said. Key investment terms include a two percent management fee on invested capital, a nine percent priority return for limited partners; and an 80 percent general partner catch-up.
Fund I currently is 75 percent invested in eight deals and is expected to be fully deployed by the first or second quarter of next year. Lingerfelt invested many of Fund I’s transactions – which typically ranged from $30 million to $50 million – alongside a number of large private equity firms, with the latter contributing the majority of the capital. Recent investments included the $17 million note purchase in January on the Richmond Marriott West in Richmond, Virginia; and the October acquisition of Riverplace Tower, a 425,000-square-foot office tower in Jacksonville, Florida, for $29 million.
Lingerfelt Commonwealth Partners was formed in 2011, through a partnership between Richmond, Virginia-based commercial real estate firms Lingerfelt Companies and Commonwealth Commercial Partners, which both sought to enter the fund management business. The firms currently jointly own a portfolio of nearly four million square feet with an aggregate purchase price of more than $700 million.