Smartland, a Cleveland-based private equity firm with $70 million in assets under management, has launched a value-added impact fund, targeting $100 million in equity commitments.
The fund has raised $16 million to date and aims to hold a first close in January with somewhere between $20 million and $25 million, according to Eric Golubitsky, investment relations manager at Smartland.
Smartland’s strategy is to buy distressed and mismanaged class C and class D properties and convert them into class B assets. The firm is trying to fill a gap in the market that has churned out a horde of class A, C and D properties, but very few class B properties, Golubitsky noted. Smartland targets properties in the Midwest — specifically Buffalo, Cleveland, Columbus, Detroit and Pittsburgh — because of an excess of inventory in those areas.
“We’re creating this B market where the Midwest has this stigma, not like the coast or Chicago or Miami that has the big appreciation,” said Golubitsky. “We create the appreciation when we’re converting the Cs and Ds into Bs.”
Smartland — which has always technically been a fund at the end of the day, as Golubitsky puts it — will continue to home in on multifamily investments, an asset class it broke into about four years ago. Traditionally, the firm bought single-family homes using its own cash and sold them to investors. This is the firm’s first multi-asset syndication.
To date, all of the fund’s investments have been on behalf of medium- to- high-net-worth investors, but the new fund will give Smartland the buying power to bring in ultra-high-net-worth individuals, family offices and smaller institutional investors.
According to Golubitsky, the fund also will allow Smartland to pursue opportunity zone projects or commercial-use projects. Still, the firm’s main focus will be on the multifamily and single-family markets.
“We want to be quick and execute with our foot on the gas with the cash behind us,” he said.
After it reaches its target, Smartland expects to deploy the $100 million over a three- to- five- year period. The firm’s long-term goal is to hit $1 billion in assets under management in the next 10 years.