The Pennsylvania Public School Employees’ Retirement System (PSERS) has approved a commitment of up to $75 million to Greensboro, North Carolina-based Bell Partners’ fifth commingled fund. Bell Institutional Fund V, which is targeting an 11 percent to 14 percent internal rate of return, seeks to acquire value-added multifamily assets in secondary cities on the East Coast and the South.
Fund V is comprised of two vehicles: an institutional fund targeting $200 million and a high-net-worth vehicle, which Bell expects will bring in an additional $100 million of capital. Through Fund V, the firm plans to purchase apartment communities in such markets as Washington DC; Dallas; Charlotte; Nashville; Austin, Texas; Fort Lauderdale, Florida; and Raleigh, North Carolina. No more than 25 percent of the fund’s capital will be deployed in any one market.
The commitment represents a follow-on investment for the $49.3 billion pension system, which pledged $75 million to Bell’s Fund IV in March 2012. In its presentation to the PSERS board on January 23, consultant Courtland Partners cited the strong demand in the rental housing market, driven by “historically low homeownership rates and robust rental household formation due to attractive demographic trends, employment growth and population growth,” as the main reason for committing to the fund.
Courtland’s report added that, due to Bell’s “reputation in the industry, history of performance and regionally-focused teams, it often has unusual access to attractive opportunities , securing assets before they are offered to other purchasers and/or selected over competing bidders.” Indeed, the documents indicate that Bell already has pre-identified three assets for Fund V, two of which have closed. Currently, the firm is conducting due diligence on the third deal, located in Fort Lauderdale.
Conversely, when addressing the potential risks of investing in Fund V, Courtland made note of Bell’s limited institutional experience and limited amount of realizations, as the firm has yet to realize any investments for Fund IV, which closed on $200 million in equity commitments in April 2013.
The new commitment comes just over one month after PSERS approved $275 million in investments to value-added and opportunistic real estate fund managers. At its December 9 board meeting, the pension approved a $100 million commitment to DRA Advisors’ Growth and Income Fund VIII, a $75 million commitment to Exeter Property Group’s Industrial Value Fund III and a $100 million commitment to The Blackstone Group’s Blackstone Real Estate Partners Europe IV.