Carmel Partners Closes 2nd Fund With $400M

SAN FRANCISCO-Locally headquartered Carmel Partners Inc. has closed its second discretionary institutional real estate investment fund with $400 million in equity commitments, largely from university endowments and foundations. Like its smaller predecessor, Carmel Partners Investment Fund II LP will invest in the acquisition, development and renovation of under-performing multifamily properties.Carmel Partners managing partner John Williams tells GlobeSt.com that Fund I is 85% invested and should be fully invested by the end of the summer. The Fund II money will be leveraged into $1.2 billion of apartments over a three-year period and underwritten to a five-year hold, he says. More than 95% of the original Fund I investors have committed to Fund II along with 11 new investors. Carmel Partners is investing $15 million of its own money in the fund. Carver says investors can expect a net return in the mid teens. As with the first fund, Williams says acquisitions could range from 50-unit properties to 1,200 unit properties. “The strategic difference between the two funds is that Fund I was a little more West Coast focused and this one will be more nationally based,” Williams tells GlobeSt.com. Fund II is nearly double the size of its first fund, which closed in November 2003 with $215 million in equity commitments. As of May 15, Fund I had purchased 23 properties with more than 4,000 units for a total cost of $380 million.Carmel Partners is one of the largest private real estate investment firms focused exclusively on the multifamily sector. Two of its more recent acquisitions have included an interest in a 900-unit, 12-property portfolio in Washington, DC, and the 162-unit Aloha Surf in Honolulu’s Waikiki-area. The company’s investment in the Villas Parkmerced Apartments, a 3,483-unit community located in San Francisco, was the largest single-asset multifamily transaction in the US. In addition to value-add properties, Williams says the fund also will consider development and strategic joint venture opportunities with select real estate operators. “Over the last decade, we have proven that value-based investing in apartment properties and active management of those investments can produce strong risk-adjusted returns through multiple market cycles,” says Ron Zeff, the firm’s founder. “We believe the current economic environment and pending demographic shifts will produce continued buying opportunities with higher long-term rent growth and improved occupancy rates.”