Walton Street targets Mexico with $350m fund

The Chicago-based private equity real estate firm launches its first investment fund targeting Latin America’s booming residential sector.

Walton Street Capital is raising its first dedicated Latin America fund targeting $350 million (€223 million) in a bid to take advantage of the region’s growing residential sector.

The Chicago-based real estate investment firm will concentrate two-thirds of the fund on Mexico, with 40 percent targeting the “for-sale residential sector” through new housing developments, according to documents from New Jersey State Investment Council.

The fund, Walton Street Mexico Fund I, is seeking net returns of 20 percent, with up to 75 percent leverage. Two-thirds of the fund will be focused on Mexico, with the remaining 25 percent invested in other Latin American countries, including Brazil, Argentina, Chile and Colombia. Walton Street was unavailable for comment.

Mexico’s burgeoning middle-class has prompted private equity real estate firms to focus on the country’s residential market. Last month, Equity International sold its remaining stake in Mexico’s largest homebuilder, Homex, six years after first investing in the company and helping take it public. At the time Gerardo de Nicolás, Homex chief executive officer, said the firm had seen a “period of tremendous growth” in Mexico over the previous five years.

According to New Jersey, Walton Street will invest 60 percent of the Mexico Fund equally between retail, hospitality and a combination of office, industrial, mixed-use and land acquisition. “Due to the for-sale residential strategy and lack of modern institutional quality commercial buildings, the focus will be on new ground-up development,” the document added.

Walton Street is also raising its sixth global real estate fund, Walton Street Real Estate Fund VI, targeting $2.5 billion with a primary focus on the US but also seeking investments in Latin America and India.