Timberland Partners Apartment Fund VII: A proven investment model over multiple market cycles

Timberland Partners Apartment Fund VII: A proven investment model over multiple market cycles

Since its founding over 28 years ago, Timberland Partners has produced a highly successful track record of syndicating outstanding investments in the multifamily apartment sector. Over that period not a single dollar of investor principal has been lost.

Many real estate investment sponsors market high returns by chasing the latest hot market or “in-demand” product type. Timberland Partners has a consistent business model that has been developed and perfected over decades of experience. Instead of attempting to do many things satisfactorily, we focus on one business model, and execute it to the highest standard.

We believe that value-add, suburban class B (and select class A) apartment communities in secondary and tertiary markets consistently deliver the highest risk-adjusted returns to investors over time. Institutional investors often prefer primary markets and the result is that investors are priced out of returns. We search for dynamic, secondary and tertiary markets with growing populations and a diverse employment base with a proven track record of rent growth. Besides the track record and hyper-focused business model, below are a few other characteristics that distinguish Timberland Partners as an investment sponsor.

Co-Investment: any real estate investment sponsor you may consider should have skin-in-the-game alongside your investment. Moreover, they should profit when you do, from the performance of the assets and not off some complex or hidden fee structure. At Timberland Partners, the sponsors of our funds have co-invested more than $23 million across our previous six multi-asset apartment funds. For the current offering, Timberland Partners Apartment Fund VII (TPAF VII) they have committed to 10% of the total equity raise, up to $10 million. 

Reputation: Our reputation for consistently delivering returns to our partners has created a loyal investment base of over 680 investors around the country. However, it is our outstanding reputation in the brokerage and lending communities that allows us to continually find and close on properties that match our investment criteria, and at favorable terms. Prior to joining Timberland Partners, our CIO – Matt Fransen worked in acquisitions and dispositions at AIMCO, one of the largest apartment REITs in the country. Returning to Timberland, he brought a national network of brokers who now hunt out properties matching our rigid criteria, and they know through years of experience that Timberland Partners closes deals under contract. No re-trading. No hidden contingencies. This reputation affords us unique off-market looks at deals they know may be of interest to our firm. Today, almost half of all acquisitions are sourced off-market. Timberland Partners has likewise developed excellent relationships within the lending community. While our preference is for long-term, fixed-rate agency debt through Fannie Mae or Freddie Mac, we have the experience and reputation to assume favorable HUD loans when appropriate. For properties with a value-add turnaround strategy we have a number of preferred banking relationships for shorter term financing options.

Long-term perspective: many real estate funds will have a fixed duration such as 5-7 years. The downside to this strategy is two-fold. First, it forces a taxable event at the sale, subjecting investment partners to a long-term capital gains tax on sale proceeds. Second, sponsors are bound by contract to wind down the fund and sell the asset(s) even if the market is unfavorable. By contrast, Timberland Partners has the option, but not obligation to sell assets when the market is favorable. Facing a down-market at the end of a loan term, instead of selling the asset our team will first look to refinance the property. In this case, investors benefit by receiving a non-taxable distribution through refinance proceeds. Alternatively, if the property is old enough that it no longer fits our business profile, but the market is favorable, we will attempt to conduct a 1031-tax deferred exchange. Like the option to refinance, this strategy also allows investors to capitalize on appreciation without being subject to immediate capital gains tax consequences. As the largest equity holder in every deal, the sponsors make every decision at the asset level within the mindset of maximizing wealth building for themselves, and our investment partners. Before making a taxable, return-of-capital distribution to the partners, we will seek every viable tax-sheltering strategy to protect and grow investor principal.

Timberland Partners is a Minneapolis-based real estate investment and management company focused on the multifamily apartment sector. In business for over 28 years, Timberland Partners owns and operates a 17,000-unit, $2 billion portfolio across the central and southeastern United States. The company specializes in value-add investments across growing secondary and tertiary markets.

Their current offering, Timberland Partners Apartment Fund VII (TPAF VII) is seeking $100 million in non-institutional equity capital for making direct investments in 8-12 apartment communities across the central U.S. Since opening for investment in December 2019, the fund has raised $51.2 million.