Waterton has been active on the acquisition front over the past couple of months—from reentering the Portland, Oregon, market with the purchase of a mid-rise community to expanding its footprint in South Florida with the purchase of a 12-story apartment tower to growing in the Seattle metro with the purchase of a garden-style community.
“We have bought about five properties this year. Most of the assets that we have bought this year have assumable debt, which provides for positive leverage,” says Waterton co-founder and CEO David Schwartz. “For instance, the Portland asset has Department of Housing and Urban Development debt with 25-plus years left at a rate below 3%.”
The national real estate investor and operator most recently acquired The Parker, a 177-unit apartment community in the heart of Portland’s Pearl District. The community offers a mix of one-and two-bedroom apartments and a wealth of amenities, such as an outdoor courtyard with grilling stations, a fitness center, a dog wash station, bike storage, and a community room with a kitchen and a business center.
According to Waterton, it plans to implement a light value-add program throughout the units and common areas. Units will receive new backsplashes, flooring, lighting, and plumbing fixtures.
In June, the firm acquired The Lakes Apartments, a 265-unit community in Bellevue, Washington, with an in-place loan and a plan for a robust value-add renovation.
“The Lakes will be a great addition to our portfolio, and we’re excited to expand our presence in the eastern suburbs of Seattle,” says Kevin Ibasco, vice president of acquisitions at Waterton. “We believe the property’s proximity to major employment nodes makes it an attractive opportunity, particularly as more companies return to the office, providing further tailwinds for apartment demand in the area.”
The Lakes, which is comprised of 29 two- and three-story buildings on a 12.8-acre site, is walkable to many of the area’s tech giants, including Microsoft’s west campus. It boasts a mix of one- and two-bedroom apartments, including 17 two-bedroom townhomes.
The value-add plan includes unit updates, with new quartz countertops, tile backsplashes, shaker-style cabinet fronts, and stainless steel appliances in the kitchens; new faux wood flooring in living spaces; and updated lighting and plumbing fixtures throughout.
The final recent acquisition, One Plantation in Plantation, Florida, also is in a prime location. The 321-unit tower was built in 2013 as part of the 860-acre Plantation Midtown master plan and is at the center of two significant South Florida employment nodes.
While being well-maintained, the LEED-certified community also will undergo value-add upgrades to bring it in line with competing newer product. The unit mix includes one-, two-, and three-bedroom floor plans with hurricane-impact windows, private terraces or balconies, granite countertops, walk-in closets, Energy Star kitchen appliances, and full-size washers and dryers. Renovation plans include flooring, countertop, and appliance upgrades to better position the property to compete with newer product.
Residents also have access to a four-story standalone clubhouse with a business center and private work rooms, a movie theater, an on-site dog park, and a fitness center with a cycle studio. In addition, Waterton will enhance the clubhouse with spaces for individual use or group meetings and will convert the existing parking garage rooftop tennis courts to pickleball courts. Wi-Fi connectivity also will be upgraded for high-speed internet access and improved cell service across the property.
Looking ahead, Schwartz says he expects more assets to be for sale, driven by high interest rates, redemptions in open-ended vehicles, and non-traded REIT and debt maturities. “The first and second quarter transaction levels were at a 12-year low, so we are starting at a low level,” he says. “I also expect continued de-acceleration in rents and occupancy as high levels of supply get delivered.”
According to Schwartz, Waterton will continue to seek positive-leverage, high-quality assets in markets with good long-term fundamentals at a discount to reproduction cost.