Advanced Real Estate Launches $250M Fund

Advanced Real Estate Services has launched its first investment fund. The fund has raised $250 million to $300 million in equity and more than $500 million in buying power. In addition to raising capital through its existing investor pool, Advanced closed a six-property cash-out refinance totaling $240.4 million, generating $100 million to roll into the fund. NorthMarq arranged financing on behalf of the borrower.

“We have been wanting to change to more of a fund structure, and we took the time during the pandemic to create the outline for it,” Paul Julian, principal at Advanced Real Estate Services, tells GlobeSt.com. “With this $100 million from the refinance, we have the seed money to start the first fund. All of our investors are private capital. It is a large network of friends and family that has grown over the years to about 500 investors. When we had the opportunity to roll the proceeds from this refinance into a new fund, it was received with great enthusiasm.”

The refinance included the 714-unit Corona Pointe Resort, 63-unit Corona Pointe Townhomes, 149-unit The 5800 Apartment Home, 149-unit Pacific Palms Apartment Homes, 88-unit Avignon Apartment Homes and the 60-unit Washington Place. The portfolio was refinanced through Freddie Mac and Fannie Mae. All of the properties with the exception of Corona Pointe Resort were pending maturities with no pre-pay penalties. “We are very fortunate because Advance has been really good about spreading out their business between Fannie and Freddie. Based on that, Freddie under the circumstances performed so well,” Michael Elmore, EVP and managing director NorthMarq, tells GlobeSt.com. “The only change in the deal because of COVID was that they had to post cash-flow escrows, but that is a common practice now. The fact that Freddie held all of the economic terms and Advanced performed on the economic side through the worst of the recession is really why this deal was able to be executed.”

Advanced rolled $100 million from the refinance into the fund and raised additional funds through its network of investors, which remains confident in Advanced Southern California real estate strategy. “Through our network, we are probably going to end up with about $150 million to $200 million in equity to go place,” says Julian. That coupled with a recent exchange fund of about $100 million, we will have $250 to $300 million worth of funds to purchase assets. We have $250 million in escrow right now, and we are looking for another $450 million to $500 million in real estate.”

Advanced hasn't changed its strategy, despite the pandemic and the market change. However, finding deals is this market has not been easy. “We only buy in Southern California, so this is a challenge, but one that we are achieving,” says Julian. “The brokerage community is taking note of our equity and bringing us off market deals. All three of the properties that we currently have in escrow are off market deals.”