Bell Partners’ New $1.3B Apartment Fund Signals Bargain-Seeking By Investors

Multifamily investment and property management firm Bell Partners announced that it just closed a $1.3 billion value-add fund in equity commitments between domestic and international investors, many who invested in previous funds.

“Fund VIII will deploy a value-add investment strategy, acquiring well-located, quality market-rate apartments in 14 target markets across the United States including Boston, Washington D.C., Raleigh, Charlotte, Atlanta, Fort Lauderdale, Orlando, Tampa, Austin, Dallas, Denver, Los Angeles, San Francisco and Seattle,” the company said in a press release. “With leverage, the Fund has investment capacity of approximately $3.2 billion. The fund’s value creation strategies include renovations, enhanced operations, and investment in transitioning neighborhoods.”

Many in CRE have been wondering when the opportunity — or distress, depending on your mood — value buying would start. Just two years ago, BlackRock said distress in multifamily could be a long wait. Apparently not that long.

“Apartment fundamentals remain solid, and we are confident that multifamily housing is well-positioned to withstand changing market conditions,” the Bell partners release quoted EVP of portfolio management Joe Cannon as saying. “As we evaluate opportunities to invest Fund VIII, we will continue to leverage the insights and capabilities from Bell’s vertically integrated operating platform to identify attractive investment opportunities and maintain our record of creating value for our investors.”

The pain in some other sectors like office have been more obvious. In early May, Brookfield Asset Management President Connor Teskey said that “one thing that we are seeing across almost every region in every asset class is an absolute bifurcation of the real estate market.” Class A and high-quality properties “are performing fundamentally better than they ever have been before.” But legacy properties without new amenities or ways of addressing ESG “are really struggling.”

But while the dynamics of multifamily are different, the category isn’t untouched. The dynamics of having financed at say 3.5% then adding mezzanine debt and leveraging to 80% to take out equity don’t work when refinancing will happen at 7% or more (the Fed not being done yet with rate hikes). Owners either put in enough equity to make the deal work or they sell.

It could get even more nerve-wracking if, as Colliers recently observed that recourse loans are again becoming part of the financing conversation. With enough capital, though, much is possible.

“It’s a time for caution but that doesn’t mean there aren’t transaction opportunities,” Lili Dunn, chief executive officer of Bell, told Bloomberg. “People still need housing.”