TA Realty to hold final close on Fund X

The Boston-based real estate firm’s latest value-added fund is expected to close near its hard cap, which has been increased to $1.575 billion, during the first quarter.

TA Associates Realty has exceeded the $1.25 billion fundraising target for Realty Associates X, its tenth closed-end, value-added fund, and has raised the hard cap for the vehicle by $75 million to $1.575 million, according to sources familiar with the matter. The final close, which is anticipated to come in at or near the hard cap, is due to occur during the first quarter.

TA Realty held a first close of $483.2 million in March 2012, according to a filing with the US Securities and Exchange Commission, and had gathered more than $1.1 billion in closed and committed capital by the end of September. TA Realty declined to comment.

Limited partners in the fund so far include the Illinois Municipal Retirement Fund, which committed $50 million in July 2011; the Texas Permanent School Fund, which made a $75 million commitment in November 2011; the South Carolina Retirement System, which committed $75 million in September 2012; and the Oklahoma Police Pension and Retirement Board and Montana Board of Investments, both of which agreed to invest $20 million in the fall of 2012. Follow-on investors represent more than 50 percent of Fund X’s commitments, while foreign investors accounted for approximately $350 million of the total capital raised, sources noted.

Interestingly, TA Realty, which currently has approximately $11.1 billion of gross assets under management, has adopted a sliding scale of management fees for Fund X. According to a presentation TA Realty made to the Fresno County Employees’ Retirement Association in January 2012, 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 0.6 percent for Years 8 through 10, if required.

Fund X will continue the same strategy as TA Realty’s predecessor vehicles, focusing on major US markets with an emphasis on the East and West Coasts, according to the Fresno County documents. The vehicle will invest in industrial, office, garden-style multifamily apartments and grocery-anchored retail, with an average deal size of $25 million. Fund X will target a gross internal rate of return of 14 percent to 15 percent.

TA Realty previously raised nearly $1.5 billion for Fund IX in 2008 and $1.74 billion for Fund VIII in 2006, the documents noted. Those funds had a gross IRR of 14.5 percent and 3.63 percent, respectively, as of January 2012.