PRP Real Estate Investment Management has launched its fourth fund, an operating partner vehicle to raise capital that the firm will invest alongside institutional joint venture partners in deals, PERE has learned.
The Washington, DC-based firm has a $100 million target for PRP Operating Partner Fund. With capital from the value-added vehicle, PRP is investing in Class A and B office and multifamily properties in six submarkets on the US’s east coast. The firm plans to buy 25 assets over four years.
PRP is targeting an investor base for this vehicle similar to that of its previous three funds. In this vehicle, endowments, foundations and smaller pension plans will purchase stakes of PRP’s co-investment in the deals it makes through the fund. The firm charges a standard 2 percent management fee, but the fund structure does not charge carried interest or a catch-up. Limited partners in the fund will receive promoted interest in each investment rather than pay a promote.
“For many reasons, this fund provides a better alignment of interest with our investors than a conventionally-structured value add fund,” Paul Dougherty, the firm’s founder, told PERE. “Due to the elimination of a single and double promote that traditionally-structured funds charge, complemented by the additional promote we share with our investors, our fully net returns are approximately 660 basis points higher than conventionally structured funds.”
“In addition, there is greater transparency to fund investors. They have a seat at the table in each investment. Further, because we are custom tailoring the most appropriate and lowest cost of JV equity capital for each investment, we are able to significantly out-perform comparable value add investment vehicles that tend to have a higher cost of capital.”
PRP, which is investing 5 percent of the fund’s total capital, has a 15 percent targeted net internal rate of return. With capital from the fund, the firm plans to invest in multifamily properties with 200 to 400 units and offices ranging from 200,000 to 400,000 square feet that need repositioning. PRP’s geographic focus is Philadelphia, Raleigh, Charlotte, Atlanta, South Florida and the larger Washington, DC area.
Founded in 2005, PRP has sponsored three institutional funds and separate accounts that total over $250 million in equity.