Real estate manager Origin Investments has opened Growth Fund IV, its newest real estate fund targeting a 14% to 16% net internal rate of return (IRR).
Fund Strategy: Origin’s latest fund will invest in multifamily development projects across fast-growing cities throughout the southeast and southwest regions of the United States.
Current market pricing for value-add and core-plus multifamily investments exceeds the cost of development in many of the top high-growth markets. Investing in development projects will allow the fund to enter these markets at a more favorable cost basis and provide overall higher returns compared to investing in existing assets.
“Growth Fund IV has been designed to maximize risk-adjusted returns. We see the greatest opportunity in ground-up development given changing multifamily housing market conditions,” Origin Investments Co-CEO Michael Episcope said. “There is too much investment capital targeting value-add opportunities today, and it’s pushing pricing on existing deals well above replacement cost. Developing is just a better way to enter these markets because we will have a portfolio of Class A properties at a lower basis than properties 10-15 years older.”
Investment Criteria: Origin’s target markets have been selected, in part, because of their lower affordability ratios relative to other markets. The target renters for the fund’s projects will have moderate-to-high incomes and choose to rent to be close to work and nightlife, plus have access to amenities.
Origin Investments utilizes a proprietary database, built by its in-house data scientists, to leverage machine learning and analyze more than 2.7 billion unique data points to uncover the best geographic areas for investment. This data is combined with the team’s knowledge of market fundamentals in specific markets throughout the country to choose investments that will deliver the most long-term value to investors.
Investment Terms: Growth Fund IV has a target net IRR of 14% to 16% with a target equity multiple of 1.7x to 1.8x over the initial four-year hold period. After the portfolio is stabilized, the fund will offer an optional hold period, where investors can opt to stay invested and receive a tax-efficient income stream projected to be 7% to 9% of invested capital annually. Alternatively, investors can elect to sell their interest back to the fund at the end of the initial hold period.
Historical Performance: To date, Origin Investments has earned an average gross IRR of 24% and a 2.1x equity multiple and no losses across 33 realized deals.
The company currently has $1.4 billion in assets under management and its performance ranks them in the top decile of the best performing private real estate fund managers ranked globally by Preqin, an independent provider of data on alternative investments.
Origin Investments’ founders also have significant skin in the game, with $60 million of their own capital invested across the company’s funds.
How to Invest: Accredited investors can participate in Growth Fund IV by signing up for an account directly through the Origin Investments website.
The company also has three other open funds available for investment, including the Income Plus Fund, QOZ Fund II and Multifamily Credit Fund.
Glossary of Terms Used in This Article
Equity Multiple: The total return achieved on an investment, calculated by dividing the total dollars received by the total dollars invested.
Internal Rate of Return (IRR): The average annual return over the lifetime of an investment.
Photo by Brandon Griggs on Unsplash
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