Security Properties, a Seattle-based multifamily real estate owner and operator, is looking to raise $50 million of equity for investments in multifamily properties located in select Western US markets. While the company previously has partnered with a number of institutional and private investors in multifamily investments, this effort represents its first discretionary fund.
The fund will make both direct and indirect investments, either through wholly-owned entities or in a joint venture partnership with institutions, over the next 36 months. It will pursue niche investments that may not fit the criteria of larger funds due to smaller size or complexity, yet fall outside the capabilities of many smaller real estate operators.
The fund will pursue multifamily investments in Western markets that include Seattle, Portland, coastal Southern California, the San Francisco Bay Area, Scottsdale and Denver. Specifically, it will focus on markets characterized by sustainable job and population growth, significant barriers to development and high homeownership costs.
“Shifting consumer preferences and lifestyles, coupled with favorable supply and demand factors, will continue to expand the renter base,” John Orehek, president and chief executive of Security Properties, said in a statement. “Our fund is designed to provide eligible investors with access to a quality pool of multifamily assets diversified by geography, execution, strategy and risk profile.”
Security Properties intends to maximize the fund’s value through a variety of execution strategies, including the selection of properties in high-growth markets in sought-after locations, the rehabilitation of Class B properties in Class A locations and the implementation of best-in-class property management practices to maximize rents, manage expenses, enhance marketing and reposition assets.
The fund will be raised primarily from endowments, family offices, wealth managers and accredited investors and plans to offer preferred returns for early commitments. Principals of Security Properties will co-invest up to 10% (with a cap of $3.75 million) in the fund, based on commitments procured. The fund’s goal is to provide investors an overall IRR between 12 percent and 14 percent and gross equity multiples of 1.5x to 2x over a seven-year horizon, net of management fees.
With a more than 40-year history in both affordable and market-rate multifamily property, Security Properties has invested nearly $156 million in 83 multifamily properties around the country over the past decade, representing a mix of core, value-add and opportunistic investments. The company’s realized IRR on these investments has exceeded 20%.