Bell Partners, a real estate investor and property manager, has raised $1.3 billion for a new fund to buy and upgrade apartments at a time when prices for many commercial properties are falling amid higher borrowing costs.
(Bloomberg) — Bell Partners, a real estate investor and property manager, has raised $1.3 billion for a new fund to buy and upgrade apartments at a time when prices for many commercial properties are falling amid higher borrowing costs.
The Value-Add Fund VIII will seek to acquire as much as $3.2 billion in properties in 14 target metro areas, including Atlanta, Austin, Boston, Dallas, Denver, Los Angeles, Orlando, San Francisco and Seattle, according to a statement Tuesday.
With Bell’s latest fund, the investor is looking to put money to work as values for properties such as apartments and offices sag.
Apartment prices have dropped 19% over the past year, according to real estate analytics firm Green Street. For all commercial properties, prices are down 15% from a peak in March 2022.
“It’s a time for caution but that doesn’t mean there aren’t transaction opportunities,” Lili Dunn, chief executive officer of Bell, said in an interview.
“People still need housing.”
On top of higher borrowing costs, landlords are confronting rising expenses to keep up buildings. Rents in certain US cities are also declining, according to Yardi Systems.
Some apartment landlords are starting to run into trouble with the surge in borrowing costs, particularly for owners of buildings financed with short-term or floating-rate debt purchased at the top of the market.
More than $680 billion in loans on multifamily properties are coming due through 2025, according to the Mortgage Bankers Association.
Apartment transaction volume has fallen amid the market volatility, but there are still sellers who need to meet redemptions, close out maturing funds or harvest gains on properties that have appreciated in value over several years, Dunn said.
In addition to buying, Bell is currently selling some properties to repay investors or reap profits.
“It’s been a great run and apartments are still strong,” she said.
The new fund, which has an eight-year term, will invest in market-rate apartments in neighborhoods close to jobs and retail centers where Dunn says Bell can add value through renovations or boost returns through management efficiencies.
Based in Greensboro, North Carolina, Bell oversees about 85,000 apartment units nationally.
Bell generated net annual returns of 17.7% on realized apartment investments through June 2022, with about $10.4 billion of total proceeds, according to a presentation to the Pennsylvania Public School Employees’ Retirement System.
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