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Brookfield and Fairfield Residential Close $1 Billion U.S. Multifamily Value Fund as Investors Focus on Renovation Returns

Fund Will Target Apartment Properties to Renovate, While Building Others in Select Coastal Markets
September 12, 2018
In January, Brookfield Fairfield U.S. Multifamily Value Add Fund III acquired Waterstone at Corona Pointe, a 628-unit complex in Corona, California, for $136.5 million.

Brookfield Asset Management Inc. and Fairfield Residential marked the final closing on their Brookfield Fairfield U.S. Multifamily Value Add Fund III with total equity commitments raised of $1 billion, another sign of investor demand for U.S. apartments that can be refurbished to boost returns.

Launched in December 2016, this is the third multifamily fund managed by Brookfield and Fairfield. The new fund plans to use mostly a value add strategy, acquiring and renovating existing apartments. It will also fund ground-up development in certain coastal markets.

Brookfield Property Partners and Fairfield committed $330 million to the fund, joining a diverse group of more than 25 other institutional investors, including public and private pension plans, registered investment advisers, financial institutions, endowments and foundations and family offices.

"The multifamily space has great market fundamentals alongside strong demographic trends that create a compelling opportunity for us to apply our fully integrated platform to generate and execute on multifamily investments," Trey Stafford, portfolio manager at Fairfield, said in a statement announcing the close.

Investments in refurbished or repositioned apartments can top 12 percent, attracting investors planning ahead to secure returns late in an extended economic expansion. In a similar move, Mesirow Financial said it has raised $567 million for its third real estate value fund, pulling in about 30 institutional investors from across the U.S., Europe and Australia as they seek double-digit returns on their investment in upgrading properties.

The Brookfield Fairfield fund aims to construct a portfolio consisting of 70 percent value-add acquisitions, properties that can be renovated or repositioned for increased returns, and 30 percent new developments, according to Dancap Family Investment Office, one of the investors in the fund.

"The value-add acquisitions will target supply constrained markets, buildings with substantial value-add renovation potential, and will target Class B and C assets with significantly lower rents than Class A product," the family office noted. "The development properties will target markets with a shortage of newly-built core assets and high barriers to entry due to difficult entitlement process."

To date, Fund III has 16 investments closed or under contract in various markets on both U.S. coasts with almost $470 million of equity committed to those investments.

Brookfield Asset Management, a Toronto-based alternative asset manager with over $285 billion in assets under management, is the majority owner of San Diego-based Fairfield Residential, which manages 43,000 units nationwide across luxury new construction and renovated apartment homes in urban and suburban neighborhoods and tax credit affordable housing properties.

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