Cortland has closed its sixth flagship value-add fund, Cortland Enhanced Value Fund VI, at its hard-cap of $1.5 billion, or 50 percent over its target, PERE has learned.
The haul is more than double the size of the Atlanta-based multifamily specialist’s fifth fund in the series, which closed in 2021 with $650 million in commitments. CEVF VI, which launched in 2022, is the fourth largest single-sector multifamily fund this year, according to PERE data.
“This feels like a very auspicious time and is going to be a really good vintage for a fund of this nature,” said Jason Kern, president of investment management at Cortland, adding the company is going in on yields “that are much higher than we could have achieved a couple of years ago.”
Kern said an influx of supply in the fund’s target regions, the Sun Belt and Mountain West, contributed to investor interest in fund six.
“Even with this historically high wave of supply coming into our markets – that’s obviously a big negative in terms of driving rents – if you’re able to just hold serve and keep rent growth flat or [manage] very small increases in that environment, it sets us up really well for when that supply wave starts to wane,” said Kern, adding that supply will likely tighten in about a year.
He said the fund had reached $1.45 billion by February, a year after Cortland raised $850 million in the first close, and they considered closing the fund then.
Ken said the final close was delayed six months to allow new overseas investors to participate, a demographic that contributed to CEVF VI dwarfing its predecessor. Overseas investors made up 23 percent of the investor base and came from Asia, Europe, Latin America, Australia and the Middle East.
About 80 percent of the investors were institutional, of which half were pension funds and roughly a quarter were financial institutions of “various types,” while foundations and endowments accounted for roughly 2 percent. High-net-worth individuals accounted for almost 20 percent of the donor base.
Kern attributed the strong fundraise to population growth in the regions Cortland targets.
“I think the strategy is a very popular one, if you think about where both domestic and foreign capital is looking to put their money into real estate these days, multifamily has been very much front and center along with industrial in terms of the major property types,” said Kern.
Kern declined to go into specifics about the fund’s targeted return or investment multiple, but said value-add multifamily funds typically provide gross returns of 14-16 percent.
The firm has committed nearly 30 percent of the fund’s capital, making the first acquisitions at the end of last year. Cortland is on pace to have 40-50 percent committed by the end of the year.
Cortland’s successful fundraise comes roughly four months after the Federal Bureau of Investigation raided its Atlanta headquarters as part of its investigation into YieldStar, a software created by RealPage that allegedly enables landlords to fix prices. Cortland uses the software for some of the 80,000 units it manages. Kern said the raid did not impact fundraising.
