Buckingham Companies, an Indianapolis-headquartered residential specialist manager, has closed on almost $300 million in capital commitments from global investors across two separate vehicles to respectively acquire or develop US attainable housing properties.
The firm opted to raise two vehicles – Multifamily Development Funding Vehicle and Buckingham Multifamily Fund 2 – with disparate strategies because of a change in investor sentiment and their desire to better customize portfolios.
“In the immediate aftermath of the pandemic, we found there was a bifurcation of investor interest,” Sourav Goswami, managing director of strategic capital partnerships at Buckingham, told PERE.
“Certain investors wanted to focus on more stable, ongoing yields, while other investors wanted to undertake more of an opportunistic approach.”
Investors in the development vehicle include the real estate arm of LaSalle’s Global Partners Solutions. The firm expects to add capital from one to three more investors by the end of the year, targeting $160 million and will deploy equity into multifamily development projects. The development venture has already invested in two assets in Denver and has identified projects that would commit 80 percent of the targeted capital.
Meanwhile, the firm closed Buckingham Multifamily Fund 2 at $215 million. Buckingham initially targeted $200 million, setting an initial hard-cap of $250 million. The manager attracted two new sizable investors into the fund, Goswami said. There are investors in the fund from the US, Europe, Asia-Pacific and the Middle East, he added.
“We engaged with a number of LPs from various regions,” Goswami said. “Due to pandemic-related travel restrictions, several prospective investors were unable to conduct their standard due diligence. We believe in a normalized environment, we would have had more new investors.”
The firm raised $175 million for Buckingham Multifamily Fund 2’s predecessor vehicle, Goswami added.
Buckingham Multifamily Fund 2 will acquire properties that require light value-add strategies and has a target return of 14-16 percent gross, Goswami said. The development vehicle targets slightly more, 18-20-plus percent. The higher return profile is due to more risk compared with the more stable cash flows from the value-add fund.
The firm identifies attainable housing as properties where rents are around 25 percent of annual median income. Buckingham targets Midwestern and Southeastern US suburban multifamily properties in markets including Nashville, Atlanta, Cincinnati, Louisville, Raleigh-Durham and Indianapolis. The firm targets those markets because of strong in-migration and a diverse job and hiring market, Goswami said.