Firm has already deployed $240 million across 14 properties
Covenant Capital Group has completed fundraising for what marks the largest capital raise in the firm’s 25-year history.
Covenant Apartment Fund XII closed with $860.35 million in commitments, alongside an additional $269.73 million raised for its companion vehicle, Covenant Affordable Housing Fund I. Together, the two funds total approximately $1.1 billion and are focused on investing in middle-market apartment communities throughout the Sun Belt.
Based in Nashville, Covenant plans to deploy the capital toward acquiring and repositioning underperforming multifamily properties, according to Govan White, president and co-founder of the firm.
The investment strategy centers on apartment communities with short-term operational or physical challenges that can be addressed within roughly nine months. Covenant primarily targets well-located Sun Belt assets that require renovations and management improvements.
“The United States continues to face a shortage of middle-market apartment housing,” White said in a statement. “Covenant Capital Group aims to deliver quality housing solutions for renters while generating strong returns for investors.”
Fund XII has already committed $240 million to 14 apartment communities across Sun Belt markets. Meanwhile, the affordable housing sidecar fund has deployed $94 million into 40 projects nationwide.
Among its recent transactions, Covenant purchased the 200-unit Waterford Place apartments in Mesa, Arizona, for $42 million, according to CoStar data.
The capital raise follows a track record of performance that has delivered returns ranging from 6.3% to 21.4% across prior funds, based on documents from the San Antonio Fire and Police Pension Fund.
In April 2024, the pension fund approved a $25 million commitment to Covenant Apartment Fund XII and later increased its allocation by an additional $10 million in October.
The San Antonio pension fund has previously invested in Covenant’s Funds VII through XI. Its commitments to Funds VII and VIII generated returns of 18.2% and 17.9%, respectively.
“Investor appetite for Fund XII underscores confidence in Covenant’s ability to perform across varying market cycles,” said Dan Barber, the firm’s managing director and chief financial officer. He pointed to the company’s more than two decades of experience in creating value within multifamily assets.
Covenant currently manages over $2.4 billion in assets, representing approximately 22,000 multifamily units. Since its founding, the firm has acquired more than $5 billion in apartment properties nationwide.
The launch of Covenant Affordable Housing Fund I marks a new initiative aimed at preserving existing affordable housing inventory. White noted that the strategy is designed to help address the nation’s affordable housing shortage by maintaining and improving established affordable communities across the country.
Source: Original reporting by Mark Heschmeyer, CoStar News.
