Investing in Private Equity Real Estate: How Origin’s Fund III Worked
(This article was updated May 29, 2019)
Fundraising for Origin Fund III successfully closed on June 30, 2017. We successfully raised $151 million from over 550 investors. Below were the questions we were frequently asked by potential investors looking to invest in Origin Fund III.
Q. What are the benefits of investing in a fund vs. an individual asset?
A: High net worth individuals turn to Origin for a private equity real estate fund that combines high expected returns with low volatility. When investors commit to our Fund, they are hiring Origin to assemble a high-quality portfolio of several real estate assets. A fund provides diversification across different property types and geographic regions. The benefit of investing in a deal is investors know exactly what they are buying into as soon as they commit to participating, and capital is put to work right away.
Q: What is a capital call period?
A: The capital call period begins as soon as the investor has participated in a Fund closing. We call capital only when we identify a property, and the process of calling the entire commitment can take up to 36 months from the final close. During this period, capital that is committed by investors is drawn down and invested over time, as properties are acquired for the fund. This is different from investing in an individual deal, which investors have to fund on day one.
Q. The money an investor commits to Fund III is not immediately transferred to Origin?
A: No. We call capital as we buy properties for the fund. We will send you an email asking you to transfer only the portion of the money you’ve committed, that we now need for a pending acquisition. You can expect your full commitment to be called in batches over a period of no more than three years after the fund’s final close.
Q: How do we decide how much money to call?
A: The amount is based on your pro-rata share of the fund: Your fund commitment divided by total fund equity equals your pro rata share. This number is multiplied by the required fund equity for acquisition.
Q: How will my capital be called during the first three years?
A: For a frame of reference, with Origin Fund I, capital was called over an 18‐month period. With Origin Fund II, it was called over a 24-month period. We cannot predict exactly how evenly capital will be called during the three‐year callable period. We buy excellent properties for the fund whenever we think it best serves our investors, instead of guaranteeing to evenly spread out the capital calls over three years.
Q: When can I expect to receive distributions?
A: Investors can expect to receive regular distributions after the fourth year. However, investors will receive distributions during the capital call period — the first three years — when assets are sold or refinanced.