IMT Closes Fifth Value-Add Fund Oversubscribed

IMT Capital has closed its fifth value-add multifamily fund, Fund V, with $820 million in equity commitments. The firm initially sought $800 million in commitments for the fund, but received strong interest from investors, which spanned the gamut of capital sources: university endowments, foundations, pension funds and high net worth individuals. “We were oversubscribed, and we chose to stay with that number because it was comfortable for the strategy and comfortable for our investment partners,” Michael H. Browne, IMT Capital’s co-founder and senior managing director, says about the fundraising process.

Value-add multifamily has become a highly popular investment class, driven by a combination of tremendous tenant demand as well as a rapid rise in leasing rates. Despite the frenzy for value-add opportunities, however, IMT is committed to a prudent investment strategy, and it is dedicated to remaining opportunistic. “Our investment partners have a long-term view of the managers that they select to execute their overall portfolio allocations,” Browne, tells GlobeSt.com. “We are not being asked by our partners to invest the fund today. The orientation is always opportunistic. We also have a 10-year fund life, so we don’t find ourselves in any rush. We want to make good investments at good prices where we feel that we can add value.”

As a result, the firm takes a holistic approach to the value-add investment model and will consider multiple methods for adding value to a property. “We are a value-add real estate firm, but value can be added in a couple of ways,” says Browne. “Value can be bought but it can also be created, and that comes from what IMT is—an investment manager on one hand and a multifamily operating enterprise on the other. Value creation includes everything in the tool kit, from opportunistically sourced ground-up development to renovation, a traditional value-add strategy, to effective property operations and prudent financing.”

While IMT’s strategy has stayed the same since day one—the company launched its first fund in 2006—it has expanded its approach as the value-add sector has become more competitive. That has included looking at different opportunities, taking on more lease-up risk and investing in new markets. “Over the last decade, we have expanded into a number of new markets based on opportunities we see in those markets. That has changed, but the fundamental strategy has not changed,” explains Browne. “That said, the opportunities are different in each cycle. Today, there seems to be a good deal of interest in traditional value-add-type investments. When there is a crowd around something, we generally like to look elsewhere to find opportunities that are under-appreciated or under-valued given investor interest in other opportunities.”

IMT will finance its acquisitions with a standard 70% loan-to-value debt ratio, although capitalization will be looked at on an opportunity-specific basis. In addition, the firm will fund renovations through its equity platform. Likewise, the capital investment will also be property and business-plan specific. With an opportunity-focused mindset, IMT has no specific volume goals or capital allocation plans. Rather, Browne’s goal is to deliver risk-adjusted returns to his investors. “Our investors aren’t focused exclusively on yields. Rather, yields become a way to achieve the result of an above-average risk-adjusted rate of return,” he says. “That is the essence of our strategy.”