Cadence Property Group (Cadence) has completed the capital raise for its first multi asset value-add fund, the Cadence Australian Real Estate Partnership I (CAREP), surpassing their initial target to raise $50m.

Under the new fund they have also made their first acquisition, a 23,626 sqm industrial site located at 525 Geelong Rd in Brooklyn, a tightly held submarket in Melbourne’s inner west. The infill site occupied by a container storage and logistics business was acquired for $13.9 million.

CAREP was established to focus on value-add real estate opportunities and continue to follow a strategy that Cadence has successfully executed since it made its first value-add investment in 2015.

Since then, Cadence has acquired an additional thirteen single asset value-add investments of which five have been successfully exited generating an average net equity IRR of 55.4% and a net equity multiple of 3.9x for its investors.

The success of this strategy to date, combined with what Managing Director Charlie Buxton has identified as an opportune time to acquire quality real estate offering strong risk adjusted returns, has led to the establishment of CAREP.

“Value add real estate investment has been a key focus of ours since 2015, having acquired approximately $200m worth of assets over fourteen transactions alongside our investment partners, largely through single asset vehicles,” said Buxton.

“Of those investments we have successfully exited five assets, achieving market leading returns for our investors.

“Based on our success to date and the likelihood of future acquisition opportunities as a result of the current macroeconomic environment, we believe now is the perfect time to expand this strategy through a dedicated multi-asset fund.”

CAREP will invest in a diversified portfolio of income-producing commercial real estate within the industrial, office and select retail sectors of Australia, looking to derive a return from both income and capital growth and targeting net equity IRRs of 12%+ p.a.

Once acquired, Cadence will look to actively add value to the properties to enhance the assets, increase rents and improve investment returns. Leveraging Cadence’s development capability, CAREP may also elect to undertake a level of straight development should favourable situations and conditions present themselves.

On top of a traditional value add approach, CAREP will look to capitalise on market dislocations and situational buying opportunities which Cadence believes are likely to materialise as a result of the current extreme interest rate environment.

“The ability to acquire real estate at attractive valuations has traditionally been heightened in periods of uncertainty, following dramatic economic shocks and generally in environments that promote unique situational buying opportunities,” added Buxton.

Cadence’s Head of Investment Management Tony Mount stated that they have observed the continued evolution of investment markets since launching CAREP earlier this year.

“We believe the next twelve to twenty-four months will provide attractive opportunities for well capitalised investment vehicles that can move quickly to acquire quality real estate offering strong risk adjusted returns. The structure of the fund and capability of Cadence to quickly secure assets will play a significant role in the success of CAREP,” said Mount

"The key differences between CAREP and our previous value add vehicles is that CAREP will have committed capital allowing us to move quickly when the right opportunities arise, as we’ve already demonstrated through our first acquisition in Brooklyn. In this market this is extremely important and it will contribute significantly to our ability to execute on the strategy and take advantage of the current environment.

"Additionally, and unlike our single asset vehicles, CAREP will be able to acquire a number of assets within the same fund providing investors with a level of diversification. Particularly in sectors such as industrial where assets regularly carry single tenant risks this ability to combine assets in a single vehicle can help in reducing the overall risk."

Cadence plans to acquire multiple assets within CAREP and to deploy the capital over an investment period of approximately 18 months.