David Schwartz says he measures the passing of time by his children's ages. So he remembers that his youngest son wasn't even a year old when Schwartz landed the cover spot on the April 1999 issue of MULTIFAMILY EXECUTIVE. Today, that son is 6 years old—no, make that 6¼, his son corrects him.
But for Schwartz, these past six years also can be measured by the growth of his company, Waterton Associates, a Chicago-based real estate investment and management company Schwartz founded with Peter Vilim in 1995.
In 1999, Waterton operated under the multifamily radar screen with just 65 employees and 7,856 apartment units. Today, the firm has 455 employees and 14,078 apartments—a scope that has doubled in the past six years. “Waterton has grown and prospered and become a very solid company,” agrees Allan Sweet, president of big player AMLI Residential, where Schwartz worked back in the 1980s.
Sweet isn't the only one watching Schwartz's company. “I have a lot of my clients ask, ‘What is Waterton doing?'” says Allan Edelson, a director at New York-based Deutsche Bank Berkshire Mortgage. “They are a good bellwether for where the smart multifamily dollar is going.”
While sticking to its original philosophy—buying properties that have the potential for value-added income through renovation and management repositioning—Waterton has ventured into a few new areas. The company now operates an affordable housing division and Waterton formed Evergreen Realty Partners, a wholly owned subsidiary that acquires industrial properties.
Like any young upstart, Schwartz and Waterton have learned their fair share of lessons along the way, especially as the company weathered the ups and downs of the multifamily market. “I think we've matured a lot as an organization dealing with the downturn of the apartment markets, and now dealing with the resurgence of the apartment markets,” says Schwartz.
One of the biggest lessons learned: Build a quality, varied group of investors. “It was always our business plan to become more on the institutional advisor side, dealing with large institutional capital,” says Vilim. The company, which is almost 100 percent institutionally funded and works directly with pension funds, has met that goal. Waterton is currently spending its largest fund to date—$200 million in equity in a joint venture with CalSTRS.
The company's financial strategy has worked well for Waterton. “These guys have done a great job getting into softer markets, but buying at price points substantially below the general market because of the cost and patience of the money of their partner,” says Edelson of Deutsche Bank Berkshire Mortgage.
Waterton's leaders have learned the value of hiring good people. “Everyone in our business is after the same product and dealing with the same investors, so what makes the difference is the people you've got,” says Vilim.