Sares-Regis Group is readying its third real estate fund, Sares-Regis Multifamily Value-Add Fund III, on the back of its recent realization and investment activities, PERE has learned.
Sares-Regis declined to comment, but PERE understands that the firm has an equity goal of $400 million for the new vehicle, which is expected to be launched by year-end.
Through its fund series, Sares-Regis pursues the renovation and repositioning of Class B multifamily properties in the western US. PERE understands that the firm will include California and the Denver, Phoenix, Seattle and Portland metropolitan markets for Fund III. Additionally, Sares-Regis is expected to target younger properties than in years past – closer to 10 years than 20 years – with the idea that newer assets would have a better relative value and ultimately would sell more quickly.
Fund III’s gross target return is expected to be slightly lower than Fund II’s 16 percent target, which itself was reduced from Fund I’s 18 percent target, according to sources familiar with the matter.
Sares-Regis, whose multifamily funds management business is led by Ken Gladstein and Bill Montgomery, is said to have received significant early support from existing investors for Fund III. Limited partners in Sares-Regis’s previous funds include the US pension plans Teachers’ Retirement System of Louisiana, Ohio Bureau of Workers’ Compensation and New Mexico Educational Retirement Board; insurance companies; and some European and Asian institutions.
Sares-Regis is preparing for the fund launch as it has completed a series of exits for its debut fund, which raised $114 million in March 2013. Most recently, the firm sold Solterra at Civic Center in Norwalk, California, a 192-unit, Class B apartment community that was its first acquisition for Fund I. The deal marked its fourth realization in three months, with a disposition spree that included the sale of Summit, a 96-unit apartment property in Redmond, Washington in September; the sale of Arabella, a 156-unit garden-style community located in Denver, Colorado in August; and the sale of The Hills of Diamond Bar, a 204-unit multifamily asset in Diamond Bar, California in July.
The firm is understood to have generated in excess of a 20 percent gross return across the five exits, and has now distributed more than 100 percent of Fund I’s invested equity back to its investors, while still holding four of the vehicle’s original nine investments.
Concurrent with its Fund I exits, Sares-Regis also has been actively deploying capital from Fund II, which is now said to be more than 80 percent invested. The firm closed on $304 million of equity commitments for Fund II in August 2016, beating its original $250 million target.