Berkshire Residential Investments has raised more than $4.5 billion for a trio of debt and equity strategies this year, with the firm closing two debt funds and last week hitting its hard-cap of $550 million for Berkshire Value Fund V.
The fundraising caps an active year for the Boston-based investment management company, which has been deploying capital from these strategies into short- and long-term multifamily debt and equity investments across the US, Michael Coffey, head of capital markets, told Real Estate Capital USA.
With Berkshire Value Fund V, Berkshire also closed on $431 million of co-investment commitments for current opportunities as well as additional $370 million of co-investment commitments for future opportunities, bringing total commitments raised for the fund to $1.35 billion. About 45 percent of the fund’s investors are international.
“We have been able to source some large, compelling investment opportunities that have provided our fund investors the opportunity for co-investment,” Coffey said.
The fund’s primary strategy is to invest in market-rate apartments, but it can also invest in other forms of rental housing that include senior housing or manufactured housing. The company held a first close for Fund V in November 2019.
Debt fund strategy
The company’s other active funds include its $1.47 billion Berkshire Bridge Loan Investors II, its second bridge loan fund, and its $1.85 billion Berkshire Multifamily Debt Fund III.
“There are some sectors that tend to outperform in an inflationary environment, where you get the biggest rent growth,” Eric Draeger, chief investment officer of Berkshire Residential Investments, told Real Estate Capital USA. “Part of the reason why we like lending on multifamily is that the defensive nature of the sector is great. People need a place to live throughout economic cycles and if we underwrite a loan off today’s rents, we believe the NOI is more likely to be higher at the end of the term of the loan than at the beginning.”
The Berkshire Multifamily Debt Fund III will focus primarily on Freddie Mac Capital Markets execution B-pieces. It will make additional opportunistic investments in preferred equity, mezzanine debt, B-notes and discounted notes.
Berkshire Multifamily Debt Fund III had a target of $1.5 billion and was launched in 2020, according to data from affiliate title PERE. The fund lined up commitments from the Massachusetts Pension Reserves Investment Management Board, which committed $150 million, with another $60 million allocated by the New Mexico State Investment Council. The Tennessee Consolidated Retirement System also contributed $200 million to the offering.
The fund’s predecessor, Berkshire Multifamily Debt Fund II, had a target of $1 billion, ultimately raising $1.25 billion before its close in 2017, according to PERE data.
Meanwhile, the firm’s $1.47 billion Berkshire Bridge Loan Investors II fund is also actively originating loans in the debt space. The firm blew through its fundraising target of $1 billion for the fund, according to data from PERE.
Berkshire Bridge Loan Investors II is part of the firm’s MF1 lending platform, a joint venture between Berkshire and Limekiln Real Estate. The fund targets senior mortgages, mezzanine debt and preferred equity, originating more than $2.3 billion of loans in 2020.