Trion launches second multifamily fund – Exclusive

The California-based firm will be using a crowdfunding platform to help raise capital for the vehicle, which has a value-add strategy targeting apartments on the West Coast.

Trion Properties is launching its second fund, Trion Multifamily Opportunity Fund II, PERE has learned.

The Los Angeles-based firm aims to raise $50 million for its value-add fund, which will target apartments in high-growth West Coast markets. The firm does not have any capital commitments yet but expects a number of repeat investors from Fund I and previous joint ventures and syndications, Trion managing partner Max Sharkansky told PERE.

Previously, Trion raised capital for its debut Trion Multifamily Opportunity Fund I from high-net-worth individuals as an investor base and used commercial real estate crowdfunding investment platform RealCrowd to add to in-house capital raising efforts. After launching the fund in March 2016, the firm closed on a total of $13.5 million from more than 100 high-net-worth investors in January, falling short of its $30 million target, according to PERE data.

For Fund II, Trion will once again use crowdfunding and target an investor base of family offices and high-net-worth individuals. However, Sharkansky expects the second fundraising effort to be shorter than the first, estimating that capital raising will take around one year.

Through Trion Multifamily Opportunity Fund I, the firm acquired a number of older apartment properties in the San Francisco Bay area and Portland, Oregon, creating value through renovations and improved asset management. Trion’s investments through the debut fund have been performing as expected, and Sharkansky anticipates the fund will ultimately generate returns in the mid-teens.

The second fund’s investment strategy will be similar to that of its predecessor, buying underperforming multifamily properties that were built around the 1970s and are in need of physical renovations or management restructuring. However, for Fund II, Trion is eyeing acquisitions in Seattle, Denver and Salt Lake City in addition to markets like Los Angeles, San Diego and Portland where the firm has invested previously, according to Sharkansky.

“We take over and we upgrade the assets,” Sharkansky said. “We update it to modern 2018 standards.”

Investing at least $15,000 into the interiors and an additional $5,000-$10,000 into exteriors, the firm will upgrade common areas like gyms and lobbies in its properties. If the property did not already have a website, the team will launch a centralized online platform where tenants can pay rent or make maintenance requests.

The firm is targeting an investment return of 14-16 percent for its second fund, according to crowdfunding platform CrowdStreet, and Sharkansky estimates a hold period of 3-7 years. He noted that the fund will hold assets for longer if the market experiences a downturn. However, he remains optimistic about the real estate market and doesn’t anticipate any kind of economic slowdown in the near term.

“We continue to remain bullish on the economy and the for-rent real estate industry,” he said. “We had very slow, sluggish growth for the first 6-7 years of [the economic cycle] and now the economy is starting to pop because of changes in economic policies.”

Founded in 2005, Trion had previously raised capital through syndication and joint ventures on a deal-by-deal basis and has historically seen an internal rate of return of more than 30 percent from its non-fund investments, according to the firm’s website. In 2017, Trion and DVO Real Estate formed a joint venture and purchased a 146-unit apartment community in San Leandro, California for $36.6 million, according to data provider Real Capital Analytics. The firm also partnered with Realty Mogul, an online peer-to-peer marketplace for real estate investments, in 2015 to finance the purchase of a multifamily community in Portland, Oregon. Trion currently holds more than $315 million in assets.