AvalonBay Closes $400M Fund II

ALEXANDRIA, VA-AvalonBay Communities has closed on AvalonBay Value Added Fund II, a discretionary investment vehicle with commitments from institutional investors and AvalonBay that total $400 million. This is the second and final closing for the fund, which has increased by $67 million after new investors were brought in.

Specifically, a new institutional investor made an equity commitment of $75 million and an existing institutional investor increased its commitment by $17 million. AvalonBay then decreased its commitment by $25 million to $125 million, based on the terms of its existing commitment. AvalonBay was unable to speak with GlobeSt.com in time for publication.

The $400 million fund can be levered up to 65%, giving it total purchasing power of $1.1 billion. To date, Fund II has not made any investments. The fund has a term of ten years, plus two one-year extension options.

Fund II’s investment strategy is to acquire and operate multifamily apartment communities in the REIT’s high barrier-to-entry markets of the Northeast, Mid-Atlantic, Midwest, and West Coast. These are primarily value add plays, via redevelopment, enhanced operations and/or improving market fundamentals.

AvalonBay formed the fund in September 2008 seeded with $333 million in equity commitments–$150 million of which came from AvalonBay.

Acquisitions appear to be the main investment channel for the REIT, at least for the moment. Last fall, AvalonBay announced it was scaling back on its development pipeline leaving intact the projects underway, including Somerset Development’s Westmont Station.