The Diversified Real Estate Manager in IAOF Growth 2017 has provided the following first quarter update that we wanted to share. The portfolio provides geographical diversification across both office and multi-family properties.
To date, we have invested 48% of the Fund’s capital across 11 properties, geographically dispersed across 6 states and 8 cities. We have intentionally positioned Fund III into higher quality assets as we are 9 years into an economic cycle and believe this risk profile offers us the ability to meet or exceed our financial return goals while significantly limiting our downside exposure.
We have adjusted the net asset value of several of our assets upwards to reflect their true market value. Our first 7 acquisitions have increased in value by an average of 25%, amounting to more than a $9.8 million increase in the portfolio’s value. Recently acquired assets still in the early phases of transitioning through their business plan are being held at their original cost basis. We will revalue assets on a quarterly basis to provide you with the most accurate snapshot of your investment’s performance. A detailed summary outlining past, present and expected performance is provided for each asset in this report.
We are investing in some of the highest growth markets across the country and are still seeing decent rent growth, price appreciation and tenant demand in nearly all of them. Despite the rise in short term interest rates, we have not seen a corresponding adjustment in cap rates or a decline in market fundamentals. Higher interest rates are generally not favorable for real estate, but it is important to keep in mind that we factor higher rates into our underwriting.
Our goal is to always find value and that has become tougher in a normalized market where capital is abundant. The biggest impact from the rise in short term interest rates has been the ability for potential deals to pencil out as higher debt costs eat into future cash flows. Our pipeline of deals is still strong and we have ramped up efforts in all our markets to source off-market deals by going directly to owners. These activities have resulted in a few promising opportunities that we hope to close in the coming months.
We expect to deploy the rest of the fund’s capital in the next 9-15 months and we will provide as much advanced guidance as possible for future capital calls. As always, we will keep you apprised of the portfolio’s performance and our progress in deploying the capital.
Above is a sample of the characteristics and projections of one investment. If you would like to see updates regarding other investments within the Fund, please click on this link.
As always, we will keep you apprised of the portfolio’s performance and our progress in deploying the capital. If you have any questions, please feel free to contact us.
We are privileged to have you as investment partners.
Look for more investment updates to come and details on our new offering designed to take advantage of the return to volatility to the market.