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RMR Group Targets $1 Billion in Assets for New Office Fund

RMR Initially Commits $100 Million, Family Member Trust Contributes $206 Million of Properties
August 3, 2018
4840 Westfields Blvd. in Chantilly, Virginia, is one of six suburban office buildings purchased by affiliates of Portnoy Family Office and being contributed to RMR's new office fund.

RMR Group Inc. is launching a new office investment fund to which the Newton, Massachusetts-based alternative asset manager will contribute $100 million.

In addition, the Portnoy Family Office, controlled by Adam Portnoy, president and chief executive officer of RMR, is contributing $206 million of owned office properties to launch the RMR Office Property Fund.

Portnoy Family Office will contribute 15 office properties with 1.1 million rentable square feet. On a combined basis, these properties are currently 89 percent occupied for a 3.5-year weighted, by rental revenue, average remaining lease term.

The properties are located in Austin, Texas; Northern Virginia, suburban Boston, and suburban Philadelphia.

None of the 15 properties are currently encumbered by debt.

The fund will be focused on acquiring and owning additional office properties throughout the U.S. The fund plans initially to focus its investments in middle market, multi-tenant office buildings located in urban infill and suburban locations in so-called non-gateway U.S. markets.

The fund considers middle market office properties to be larger than 50,000 square feet but valued at less than $100 million.

"Since this is a new business endeavor for RMR, it may take some time for the fund to raise additional capital from private investors, but we expect the fund to be at least $1 billion in total assets within the next five years," Adam Portnoy said in a statement. "Forming a fund that makes investments in commercial real estate for private investors is a natural extension of RMR’s business."

The fund has about $300 million of immediate capacity for new acquisitions and should be able to achieve more than $500 million in total assets without the need for additional capital from third parties.

The fund is being marketed to private investors and is targeting 8 percent to 10 percent annual returns through a combination of current income and long-term capital appreciation.

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