Originally Published on Real Estate Alert on August 3rd, 2016.
A multi-family buyer and a crowdfunding shop are teaming up to market a real estate fund that would acquire value-added apartment properties in the Midwest.
The two firms, Hamilton Real Estate Capital of Rye Brook, N.Y., and CapitalFund Realty of New York, are soliciting $50 million of equity. Their return goal is 16%.
According to its website, Hamilton has acquired some $500 million of apartment properties since it was formed in 2005 by principals Thomas Kaplan and Eli Glanz. Kaplan is a veteran real estate investor. Glanz previously worked at Lehman Brothers.
CapitalFund, which was set up last year, specializes in raising relatively small amounts of money from individuals for investment in real estate funds. It also manages funds itself. The New York shop, which operates under the name Capfundr, is run by chief executive Mitch Wasterlain, a former president of ORIX Capital Markets of Dallas and chief investment officer of New York-based NorthStar Realty Finance.
CapitalFund is handling the marketing of the fund. The twist is that it has a two-pronged strategy. In addition to reaching out to small institutional investors, family offices and high-net-worth
individuals, the firm is also soliciting equity from accredited investors via its website. The minimum investment is $10,000.
The vehicle, called Capfundr Hamilton Multifamily Fund, would target properties whose values fall below the level typically sought by institutional investors. It would consider markets
like Cincinnati, Indianapolis and Columbus, Ohio, whose 7-9% prevailing capitalization rates exceed the 4-5% level now common in major metropolitan areas.
The fund would focus on properties that would benefit from improved management and renovations. With leverage, the vehicle could buy $200 million of apartments. The annual management fee would be 1% to 1.5%, depending on the size of the investment. After investors received a 7% preferred return, Hamilton and CapitalFund would be entitled to 20% of profits.
CapitalFund also plans to team up with other investment managers to operate funds that would acquire other types of properties. Also, it is seeking to raise $5 million for a vehicle,
Capfundr REIT Value Fund 1, that would buy shares of nontraded REITs in the secondary market.