Waterton collects nearly $1bn for latest fund – Exclusive

The Chicago-based multifamily real estate firm has raised its largest-ever property vehicle, which is nearly double the size of its predecessor.

Waterton has held a final close on nearly $1 billion for its largest-ever real estate fund, Waterton Residential Property Venture XIII, PERE has learned.

The Chicago-based real estate firm closed on a total of $920 million for the multifamily value-added fund, beating its original $750 million target by a significant margin and landing within striking distance of its $1 billion hard-cap.

Waterton launched Venture XIII in the fall of 2016 and held a first close of $234.38 million in April 2017, according to a filing with the Securities and Exchange Commission. Limited partners included US and Canadian public pensions, US and foreign insurance companies and family offices. Among the US public pensions in the fund were the Employees Retirement System of Texas, which earmarked $65 million; Kansas Public Employees Retirement System, which agreed to invest $50 million; and the Orange County Employees’ Retirement System, which committed $100 million, according to PERE data.

Venture XIII attracted a total of 14 LPs, half of which were re-ups and half of which were new relationships. The total equity commitments also were split evenly between the two groups.

The new fund was nearly double the size of its predecessor, which attracted a total of $511 million, slightly exceeding its original $500 million target, in October 2015. Venture XIII’s significantly larger equity haul resulted from a greater number of investors and larger average check sizes compared to the previous fund in the series. Venture XII had 12 LPs with an average commitment of $43 million, while Venture XIII has 14 LPs with an average commitment of $66 million.

To date, Waterton has closed or committed 20 percent of the fund’s equity to six transactions representing approximately $400 million in total capitalization. They include the acquisitions of South Side Flats, a 288-unit rental community in Dallas in June; a 404-unit rental community rebranded as The Citizen at Shirlington Village in Arlington, Virginia in August; and most recently, Carrington at Barker Cypress, a 330-unit rental community in Cypress, Texas, in a deal announced earlier this month. With debt, the firm plans to invest more than $2.5 billion through Venture XIII in 25-30 multifamily assets over the next two years.

With the fund, Waterton will pursue both urban and suburban multifamily investments in major US markets, with a particular focus on well-located, middle-income housing. Targeted multifamily assets will encompass varying ages and building types, including garden-style, mid-rise and high-rise communities.

The Waterton Residential Property Venture fund series typically targets a 13 percent net internal rate of return and a net equity multiple range of 1.5x to 1.8x. Venture XI was returning a 1.88x multiple and 21.85 percent return as of September 30, according to the most recent real estate portfolio report from the Oregon Public Employees’ Retirement Fund. OPERF disclosed a 1.23x multiple for Venture XII but did not provide an IRR, noting investments held for less than three years are generally considered to have performance data that is “non-meaningful.”

Park Madison Partners served as placement agent for the fund in Canada and on a select basis in the US.

Waterton was founded in 1995 by David Schwartz and Peter Vilim, the latter having started semi-retirement last year. The firm had raised and invested a number of smaller investment vehicles with institutional investors and family offices prior to raising its first large commingled real estate fund, Waterton Residential Property Venture XI, in a single close in February 2011.