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Waterton raises its largest-ever US multifamily fund

Waterton Residential Property Venture XIV will have a value-add strategy, targeting multifamily rental investments in diverse markets across the US.

Chicago-based manager Waterton has closed its latest value-add multifamily vehicle at its $1.5 billion hard-cap, to capitalize on the investment opportunities arising from the ongoing market disruption.

Waterton Residential Property Venture XIV is the firm’s largest vehicle to date, and significantly exceeds the $920 million raised by the predecessor fund in 2018. The fundraise, completed virtually and led by the firm’s in-house investor relations team, received commitments from a diverse range of institutional investors. The US investor base includes the Connecticut Retirement Plans and Trust Funds, which committed $100 million, and the Employees Retirement System of Texas and the Teachers’ Retirement System of Louisiana, which each invested $50 million.

According to an August 2020 meeting document from CRPTF, the fund is charging a management fee of 1.25 percent on committed capital during the investment period and 1.5 percent on invested capital thereafter, in line with industry standards.

The firm is also giving investors that make a minimum commitment of $100 million a seat on an investment advisory committee set up for the fund, according to the US pension fund’s document. The investor advisory committee is understood to have consisted of seven members, including three public pension funds, three US insurance companies, one sovereign fund and one consultant, as of the first close in May 2020.

Through the fund, which has a 10-year term with three one-year extensions, the firm is expecting to invest in opportunities arising out of what it describes as a period of “historic disruption,” including direct multifamily acquisitions, debt secured by multifamily properties and multifamily asset recapitalizations.

“This fund represents a unique opportunity to invest in a strategy we have been executing for 25 years that evolves to capitalize on cycle-specific opportunities, which should be plentiful in the current market environment,” said David Schwartz, chairman and CEO of the firm, in a company statement.

According to the CRPTF document, Waterton will target a net 12-13 percent internal rate of return and a 1.5-1.7x equity multiple for Venture XIV, with a stabilized annual current income of 4-6 percent. The fund’s capital has so far been deployed in a two-property portfolio in Hawaii, three assets in California, and a portfolio in Atlanta.