CHICAGO, IL – Earlier this year, national real estate investor and operator Waterton closed fundraising activity for a multifamily value-add fund with $1.5 billion in equity commitments from global institutional investors. Waterton launched the fund, known as Waterton Residential Property Venture XIV, in May 2020. 

The first deployment from the fund was a four-property, 1,824-unit portfolio in metro Atlanta followed by a two-property portfolio in Hawaii and three assets in California. The largest-ever fund from Waterton will continue to target both urban and suburban assets in major U.S. markets.

The value-add investment strategy is nothing new for Waterton. The Chicago-based company has taken this approach for the last 25 years. But today there is strong demand among investors to be in the multifamily sector, says Rick Hurd, chief investment officer. 

As a result of the COVID-19 pandemic, some acquisitions are what Hurd calls “urban distress.” In other words, Waterton is making investments in areas like downtown Los Angeles and San Francisco in anticipation that demand will come back to the urban core over the next couple years. Many renters have migrated to the suburbs during the pandemic to be away from densely populated areas.

For Ted Stratman, managing partner with Chicago-based Interra Realty, the term “value-add” is broad-ranging. From 2010 to 2013, most of the value-add multifamily properties he sold were almost completely vacant and in need of a top-to-bottom renovation. Now, while gut rehabs still exist, there are more buyers looking to renovate and reposition occupied buildings. They update finishes and add amenities to underutilized spaces as units turn over.

“The demand for value-add multifamily is always high, with a large influx of new buyers and capital in recent years,” explains Stratman. “The pandemic only increased that demand as a flight to quality from retail and other struggling sectors led more investors to multifamily.”

Read the full REBusiness article here.