By Jon Peterson
Chicago-based Waterton Associates has formed a new $800 million apartment investment venture that will include making acquisitions in Seattle and San Francisco.
“I think that these two markets are very attractive to own properties in. They have diverse employment centers led by industries that we like, such as technology. These areas also have a strong demand from other investors, which will be important when we decide to the sell the properties we buy in the future,” says Max Peek, a senior vice president of acquisitions for Waterton.
There is a total of $400 million of equity being put into the venture. The mass majority of this is coming from the two institutional investors in the venture. These are Allianz Real Estate of America and Clal Insurance. Waterton made a small co-investment contribution to the partnership, as well. The leverage component on the portfolio will be in the range of 50 percent.
The kinds of transactions done for the partnership represent a change in strategy for Waterton. Throughout its history, the real estate manager has been known as a buyer of value-add apartments throughout the United States. For the new partnership, the deals will be for a core to core plus kind of strategy.
“We think that this is a logical extension of our investment strategy. It’s our opinion that we will be able to add value over the long term even if we are buying core and core plus assets in large part due to our strong management skills we have on our current apartment portfolio,” said Peek. The company manages an apartment portfolio totaling 18,000 units.
The goal for the partnership is to buy properties that can produce six percent to seven percent annual cash returns. The holding period for the partnership is 10 years. Most of the deals for the partnership will have a minimum transaction size of $50 million.
The partnership will focus on the investment of properties that are located in either an urban or suburban infill locations. It will be investing in six major markets. These would be Boston, Chicago, New York Metro and Washington, D.C. besides San Francisco and Seattle. There are no assets in the partnership at this time.
Allianz Real Estate is a major international player in real estate. “We are very excited about this new program as it allows Allianz to increase its long-term exposure to the U.S. multifamily market as well as expand our network of strategic co-investment partners,” said Christoph Donner, chief executive officer of Allianz Real Estate of America in a prepared statement. Allianz Real Estate is based out of New York.
Clal is a major financial institution based in Israel. “Clal is building a sizeable portfolio of institutional-quality assets in major metropolitan markets within the U.S. We see immense potential in partnering with reputable and experienced companies such as Allianz and Waterton Associates,” said Tamir Kaza, chief executive officer of Clal US Management, the wholly owned subsidiary of Clal Insurance in a prepared statement.
