(Read more on the debt and equity markets and the multifamily market .)
DALLAS-Dutch pension fund PGGM has pledged another $100 million to Behringer Harvard, with the option of raising the equity stake to $300 million. The co-investment is aimed solely at acquiring new and to-be developed, class A multifamily properties in the US.
Mark Alfieri, SVP of the Dallas-based investment group, tells GlobeSt.com that PGGM has a three-year window to invest in the pool, which was jump-started in May 2007 when the pension fund made its first direct investment in US real estate. "It's a real credit to our team and our management team to have the confidence of such a prestigious pension fund," he says.
In the past eight months, Alfieri says Behringer Harvard has spent $82 million or 80% of PGGM's first funding round to acquire nine multifamily complexes with close to 2,500 units in the metro areas of Atlanta, Dallas, Houston, Las Vegas and Washington, DC. In the near term, the co-investors will close on the Sartori at 1111 E. Sunrise Blvd. in Fort Lauderdale and properties in Denver and Washington, DC. The portfolio is being amassed for a seven- to 10-year hold.
The PGGM-Behringer Harvard pool provides equity to developers for projects from coast to coast and border to border, with the understanding that the backers get the deed once the project is completed and leased up. Development partnerships have been sealed with Fairfield Residential of San Diego, Atlanta-based Trammell Crow Residential, Houston-headquartered Simmons Vedder & Co., Greystar Development & Construction, also from Houston, and Altman Cos. of Boca Raton, the Sartori's developer. Alfieri says talks are under way "with virtually every major developer in the country right now" to add to the co-investors' private stock of developers.
The first two funding waves ultimately will yield about 35 properties. "We believe we will do another 20 ventures with the expanded relationship with PGGM," Alfieri says, adding upward of 4,000 units could result from current negotiations.
According to Alfieri, the equity investments most often are supporting 70%-leveraged construction loans. The debt ratio changes when it's time to roll to permanent financing. Behringer Harvard's MO is 60% to 65% leverage of net asset value.
PGGM is the 17th largest pension fund in the world. Its US holdings previously consisted of investing in REIT funds and owning shares in predominately US real estate companies. It had been the largest stakeholder in Chicago-based Equity Office Properties. The investment marriage with Behringer Harvard is "a function of the two parties having similar goals as it relates to investment objectives," Alfieri explains.
Under the terms of the PGGM agreement, Behringer Harvard manages all joint ventures with development partners, providing a broad-based spectrum of services from legal processes to property management. "We believe PGGM's decision to increase its investment in our platform is a testament to the quality of these properties, their geographic diversity and the unique approach we've developed to achieve exceptional pricing," Robert M. Behringer, founder and CEO of Behringer Harvard, says in a press release about the increased allocation.
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