Acquisitions, General, Industry

Seattle multifamily company closes $100 million fund as market bumps along the bottom

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Seattle-based Timberlane Partners has announced the successful closure of its multifamily real estate investment fund with over $100 million in equity.

Backed by ultra-high-net-worth investors, family offices, and RIA (registered investment adviser) firms, the Timberlane Acquisition Fund is building on the track record of Timberlane, which says it has delivered returns averaging over a 25% net internal rate of return across sold assets since the company’s founding 13 years ago.

Timberlane Acquisition Fund (TAF) is a closed-end private real estate fund designed to acquire institutional multifamily assets in the West Coast and Mountain West regions.

“Timberlane’s track record of success and transparency instilled confidence in both our existing and new investors to participate in our first institutional scale fund,” Timberlane co-founder and Principal John Chaffetz said in a news release.

The fund has closed three acquisitions: one in Olympia and the Koi and the Wilcox, both in Ballard. A fourth will close in May, Timberlane Managing Director Jon Hallgrimson said in an interview.

“We’ve deployed about 50% of the fund,” he said. “We will most likely buy probably four more, (though it) depends on the size. … Ultimately the fund will have between seven and nine assets total.”

Based on his experience the market has reached the bottom or is bounding along on it, according to Hallgrimson.

“We will start to see pricing start to move up in the not too distant future. Everybody thinks it’s going to keep falling, and that the market is terrible, but it tends to firm up quicker than people expect,” said Hallgrimson, who worked as a broker at CBRE in Seattle for 35 years.

With multifamily property values down approximately 20% from their July 2022 peak, the TAF-funded acquisitions were secured at an estimated 30% discount to replacement cost, according to Timberlane. At a time when institutions, real estate investment trusts and some other investors are on the sidelines due to liquidity issues, there’s not much competition.

Hallgrimson said Timberlane is competing against high-net-worth investors.

“They recognize that these values are well below peak pricing and well below what it costs to build,” he said.

Rents in Seattle have been flat for about two years, and Hallgrimson expects this to change next year, the result of a limited new supply coming on line. Meanwhile, Seattle is riding the AI wave led by Microsoft, Meta, Google and Amazon, while the new pro-business City Council asserts itself in Seattle.

“I think that that all leads to probably another year with rents fairly flat, and I think they will start to move (after),” he added.