The Chicago-based manager known for its residential and hospitality focus has been exploring the option of selling a minority stake since last year, wanting to take advantage of the liquidity an injection of capital would offer. Almanac made sense for a few reasons but a main selling point was the firm’s real estate focus, providing more strategic value to an M&A deal, Schwartz said. Berkshire Global Advisors advised Waterton on the transaction.
Almanac’s investment is expected to bolster Waterton’s balance sheet, allowing the latter firm to invest in larger deals than it typically has, Waterton CEO and chairman David Schwartz told PERE. The investment also allows Waterton to grow its level of GP co-investment capital committed to deals alongside the capital the firm raises through funds and joint ventures. PERE understands Almanac will take a 20 percent stake in Waterton.
The growth of GP co-investment capital is important for talent retention and succession planning, Schwartz said. Not only will Schwartz and his co-founder and vice-chairman Peter Vilim have more skin in the game, but so will the senior executive team. That increased participation is likely to make people stay, he added.
Almanac’s investment will also help to drive Waterton’s expansion into multiple property sectors, including single-family rental properties, a strategy the firm launched in March through a joint venture with tech-focused sector specialist Second Avenue. Schwartz also said that the capital investment will help it grow its hotel and senior living platforms alongside its traditional multifamily business. “This capital allows us to grow all four of the different asset classes we’re focused on right now,” he noted.
The firm mostly raises and deploys capital through its series of institutional funds. The most recent fundraise for Waterton was its Waterton Residential Property Venture XIV fund, which closed on $1.5 billion last year with commitments from the Oregon State Treasury, Maryland State Retirement and Pension System and California State Teachers’ Retirement System. Schwartz declined to discuss future fundraising efforts.
However, Waterton could tap into new sources of fundraising capital through its partnership with Almanac. For example, the firm has not traditionally had relationships with high-net-worth investors, which Waterton could potentially now access through the large wealth management platform of Almanac’s parent company, Neuberger Berman.
“We think the partnership will allow us to look into that,” Schwartz said. “There’s very significant capital out there that could diversify Waterton’s institutional capital base.”
Waterton, meanwhile, represents Almanac’s second minority interest in a real estate manager, having previously acquired a stake in Slate Asset Management.
“Several of us in the Almanac leadership group have known Waterton for more than 15 years,” said managing director Andrew Silberstein. “There is a longstanding mutual respect that gives us all a high level of comfort in the cultural fit and our ability to collaborate and fuel the growth of this enterprise as partners going forward.”
The firm declined to disclose the Almanac vehicle that made the Waterton investment.