By Jon Peterson
Chicago-based Waterton Associates has paid $20.2 million or $130,000 per unit late last year to acquire the 155-unit Martha Lake apartment complex in Lynwood located at 16626 6th Avenue West.
The real estate investment manager felt there were several positive aspects to this transaction. “One is that our price point is well below replacement cost. We figure that replacement cost for this kind of project in Seattle would be around $170,000 per unit, so our cost is 25 percent below cost. We also were able to attract some new debt on the property, which lowered the interest rate significantly. The debt held by the previous owner had an interest rate of around 5 percent,” says Michelle Wells, a senior vice president in investor relations with Waterton.
This transaction is the first acquisition that Waterton has completed in Seattle since 2004, and the firm will likely be looking at additional deals in the region. “I think that we would like to acquire more properties in the Seattle market going forward,” said Wells.
Martha Lake is located around 15 miles north of downtown Seattle. While there are many residential units planned for the city itself, Waterton does not feel this location should be terribly impacted by all the additional inventory added in the downtown market.
The new owner will be making a capital investment toward improving some aspects of the property. This will include fixing up the gym in the complex as well as modernizing the common areas. The complex has a mix of one-, two- and three-bedroom apartments as well as a number of on-site amenities that include an outdoor swimming pool, racquetball court, spa, resident-only fitness center and lounge.
Waterton Associates acquired the property for its commingled fund, Waterton Residential Property Venture XII. The real estate manager is in the process of raising $500 million of equity for the fund, and it is expecting to have a final closing sometime around September of this year. A recent new investor to the fund with a $75 million commitment was the Orange County Employees Retirement System. Oregon Public Employees Retirement Fund had already been part of the fund with a $100 million commitment.
Venture XII is a value-add commingled fund that invests in apartments around the country. There are a total of 10 assets in the commingled fund at this time and two additional investments under the letter of intent stage. The total amount of equity invested or allocated for these transactions for the fund is $227.8 million. This represents 45 percent of the targeted capital commitments.
Waterton seeks to acquire value-add apartments located in in-fill suburban and urban markets on a nationwide basis. The targeted returns for the commingled fund are at least a 12 percent net IRR. The real estate manager will be making a co-investment into the commingled fund of 4 percent of the total capital commitments up to $20 million. The investment period for the fund lasts until April of 2017.
