Macfarlan Begins Circling Wagons to Launch Two More Funds

DALLAS-Locally based Macfarlan Real Estate Investment Management, marking its third year in a niche financial arena, is laying the groundwork to open two more funds by summer's end. The capital-raising campaign for up to $100 million in a phased-in equity collection will begin shortly after a $20-million fund reaches full investment.

"We strategically try to match capital raising with deal flow so the money's not just sitting around," John Jenkins, Macfarlan's president and managing partner, explains to GlobeSt.com. The firm's holding two contracts on office and medical office properties in the Southwest, which will close out the existing fund, Mac Diversified Income, and set plans in motion for the expansion. In the past three years, Macfarlan has raised $105 million to $110 million to acquire properties of all types.

Jenkins says another fund, much like Mac Diversified Income, will be launched for office, hotel, industrial, retail and joint venture multifamily acquisitions. The goal is a 6% to 8% return for investors. The fund will target leased properties in the $10-million to $25-million category.

Jenkins says the team also will be setting up Mac Value, a buying pool for just what the name implies--value-add properties of all kinds, including land, and opportunistic plays. The special fund, targeting deals in the $15-million to $40-million range, will open doors for joint venture development and acquisition regardless of product, Jenkins says. The fund is aimed at delivering a 14% to 15% return.

"We think where the cycle is today, we'll find some opportunities to put into that fund," Jenkins says. And as before, Macfarlan is doing its shopping off market or as a "select" buyer on brokers' call lists. Despite the inside track, it still can be difficult to land deals because "there's so much capital in the marketplace," he says. "This is where we're really earning our stripes."

Jenkins says the new funds will have the capacity for $50 million apiece, planned holds of three to five years. But, he stresses, the firm's plan is to stick to its tried-and-true "conservative" stance when it comes to raising the capital. Key to the strategy is a "bridging capability" so the team doesn't have to pre-sell the property in order to close, Jenkins explains. "It gives us plenty of powder to close multiple transactions at one time," he adds.

Founded in 1994, Macfarlan this year marked a three-year transition from a property management company to an investment management firm. To date, it's launched four funds and 22 limited partnership, single-asset investments. In 2003, Macfarlan raised $18 million; the following year it drummed up $60 million. Jenkins says this year's expectation is $75 million.

The firm's average investor contributes $75,000 per deal. The "black book" contains 1,500 investors, mostly US names in the $1 million or more net-worth class although there are some smaller-size investors, according to Jenkins.