TA Realty returns to fundraising trail – Exclusive

The Boston-based firm is seeking $400m more for its latest value-add fund than the predecessor vehicle.

TA Realty is back in the market with its latest value-add fund as it wraps up investing the predecessor vehicle, PERE has learned.

The Boston-based firm declined to comment. TA Realty launched Realty Associates Fund XII earlier this month, according to a filing with the Securities and Exchange Commission, but the filing did not reveal any additional details on the fund. PERE understands that TA Realty is targeting a $1.25 billion raise for the fund, which does not currently have a hard-cap, a source with knowledge of the fundraising process said.

The firm, which manages about $9.5 billion, expects a first close at the end of June and a total capital-raising period of about nine months. Fund XI closed on $879.2 million in May 2017.

Fund XII will continue the same investment strategy as TA Realty’s predecessor vehicles, focusing on major US markets. The vehicle will invest in industrial, office, garden-style multifamily apartments and grocery-anchored retail, with an average deal size of $25 million. Fund XII’s investment period runs for two years after final close, and, similarly to predecessor vehicles, its leverage is capped at 50 percent.

Like its predecessors, Fund XII’s portfolio is expected to comprise about 45 percent industrial assets, 35–40 percent office, 15 percent multifamily and 5 percent retail.

The fund series targets a net internal rate of return of 10–12 percent. Fund X’s projected net IRR is 11.16 percent, according to documents from Arizona Public Employees’ Retirement System, which earmarked $75 million for Fund XII and earlier invested in Funds X and XI.

Echoing previous vehicles, TA Realty has a sliding scale of management fees for Fund VII. According to APERS, management fees will begin at 0.5 percent for year 1 and increase until year 5, when they peak at 1.25 percent, before declining to 1.2 percent in year 6, 1.0 percent in year 7 and 0.6 percent for subsequent years.

Fund XII’s investor base is expected to be similar in composition to the largely institutional roster of the predecessor vehicles in the series. Other investors in the current vehicle include the City of Tallahassee Pension Fund, a returning limited partner that allocated $20 million to Fund XII and $25 million to Fund XI, according to PERE data.

The firm is using two placement agents for international reach: Frankfurt-based Selinus Capital targets German investors, while Toronto-based Further Capital is seeking Canadian investors.

TA Realty’s most recent transaction was the purchase of Warner Business Center, an industrial center in Phoenix, Arizona, earlier this month for $5.2 million, according to data provider Real Capital Analytics. The deal is understood to be one of the last investments for Fund XI.