Waypoint eyes $500 million buy-to-rent fund

The Oakland, California-based private equity real estate firm – which previously raised $100 million from high-net-worth individuals – has begun marketing its first institutional real estate vehicle to investors.

Waypoint Real Estate Group has initiated conversations with investors about raising a new real estate fund. The new vehicle, Waypoint Fund II, will target $200 million in equity and $300 million in debt – about half of the capital needed to reach the firm’s goal of acquiring 12,000 to 15,000 single-family homes by 2013.

Waypoint Fund II marks the first time the Oakland, California-based private equity real estate firm is targeting institutional investors – including pension funds, foundations and endowments – for a commingled capital raise, according to sources familiar with the matter. The firm, which declined to comment, previously had raised $100 million from high-net-worth individuals through a series of funds to acquire foreclosed homes for rent. Waypoint currently is evaluating various options for structuring the vehicle, including as a commingled fund, a club deal or several separate accounts, with plans for an official launch during the first quarter of 2013.

Waypoint’s first institutional investor was Columbia University’s endowment, which committed $50 million to the firm last year through a dedicated fund. GI Partners also has committed up to $400 million through a separate account with Waypoint, on behalf of its $1.9 billion GI Partners Fund III fund. GI’s equity will be matched with $600 million of debt to allow the firms to ultimately acquire up to $1 billion in the property type – or 7,000 to 8,000 homes – by the end of 2013.

Waypoint, however, has a larger goal of purchasing 12,000 to 15,000 single-family homes for rent by the end of next year, of which GI’s commitment represents about 40 to 50 percent of the equity needed for the venture. The firm is seeking to raise the remaining equity through Waypoint Fund II.

Formed in 2008, the firm has been expanding rapidly in recent months and currently has about 230 employees and 2,100 homes in California and Arizona. It is one of a number of private equity real estate firms with aggressive plans to acquire assets in the property type.

Los Angeles-based Colony Capital, for example, has formed a single-family rental REIT, Colony American Homes, and plans to invest up to $1.5 billion to acquire 10,000 to 15,000 homes by mid-2013. The distressed debt investor to date has purchased or has in escrow approximately 3,000 houses in Arizona, California, Nevada, Texas, Georgia and Colorado. It also plans to expand into Florida, South Carolina, North Carolina and Virginia over the next six months. 

All of the houses owned by Colony American Homes are real estate-owned assets acquired through trustee auctions, multiple listing services, short sales, local investors, as well as banks and government-sponsored enterprises such as Fannie Mae and Freddie Mac. Prior to the launch of the REIT earlier this year, Colony had made its initial investments in single-family rental properties through the acquisition of distressed loans from the Federal Deposit Insurance Corporation.