{"id":1004129317,"date":"2015-10-15T19:04:17","date_gmt":"2015-10-16T03:04:17","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004129317"},"modified":"2020-04-22T23:06:05","modified_gmt":"2020-04-23T07:06:05","slug":"october-issue-profile-watertons-smooth-blend","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/october-issue-profile-watertons-smooth-blend\/","title":{"rendered":"Profile: Waterton’s Smooth Blend"},"content":{"rendered":"

By Gail Kalinoski, Contributing Editor<\/em><\/p>\n

David Schwartz and Pete Vilim have come a long way since the evening in 1995 when they conceived the plan for Waterton Associates LLC<\/a> over an impromptu dinner of strawberry Pop Tarts.<\/p>\n

Two decades later, the executives lead a diversified national company that has invested $5 billion and encompasses a $3.5 billion<\/p>\n

\"David<\/a>

David Schwartz<\/p><\/div>\n

multifamily portfolio, 13 select-service hotels in major markets, as well as fundraising and property management affiliates.
\nAs Waterton Associates starts its third decade, its founders are about to open the company\u2019s latest chapter. In October, they will complete the integration of their multifamily and hospitality businesses into a single company, which will be known simply as Waterton.<\/p>\n

Schwartz and Vilim set the change in motion several years ago because they grasped \u201cstriking similarities in operational philosophies\u201d between apartments and hotels, including e-procurement, branding and dynamic pricing, Schwartz explained. The company\u2019s focus on customer service crosses both sectors and it seemed natural to bring them together in what they coined \u201cresitality,\u201d a term that blends \u201cresidential\u201d and \u201chospitality.\u201d Schwartz said they have trademarked the term.\u00a0Waterton\u2019s transition started in 2013 with the consolidation of the companies\u2019 human resources departments, followed by construction and accounting. In October 2014, the partners named a new COO: Mark Zettl, who joined the leadership team six years earlier as an executive vice president for Ultima Hospitality<\/a>, the company\u2019s hotel affiliate.<\/p>\n

One of the goals is to \u201cbring homelike experiences to our hotel guests and bring hospitality experiences to our multifamily residents,\u201d Schwartz said. Doug Bibby, president of the National Multifamily Housing Council<\/a>, where Schwartz is the secretary and is on track to become chairman, agrees that Waterton\u2019s blend of its multifamily and hotel businesses looks like a promising move. \u201cThere are a lot of synergies. We learn from each other as we go along,\u201d Bibby said. \u201cWe tend to attract people from hospitality to come work as staff for our companies, in property management in particular.\u201d<\/p>\n

\"Peter<\/a>

Peter Vilim<\/p><\/div>\n

Waterton\u2019s founders became acquainted when they worked together at AMLI Realty Co<\/a>., the Chicago-based multifamily investment and management company. By 1995, Schwartz was a vice president of acquisitions at Equity Residential Properties Trust, and Vilim was working as an investment officer at Berkshire Realty Co. In May of that year, Schwartz told Vilim that he had a business proposition. In his excitement, however, Schwartz forgot to order food before the brainstorming session, which prompted a brief stop at a nearby convenience store, where the two men settled on a box of strawberry Pop Tarts to tide them over. Thus fortified, Schwartz made his pitch.<\/p>\n

We Have Liftoff<\/strong>
\nFollowing a model Equity Residential<\/a> was using at the time, the proposed business would buy distressed properties through the Resolution Trust Corp. (RTC), the federally owned company tasked with liquidating distressed assets in the wake of the 1980s savings and loan crisis. \u201cIt was the tail end of the RTC era,\u201d Schwartz recalled. \u201cI knew there was a short window to do this.\u201d Also essential to the plan was adding high-impact elements like fitness centers\u2014then relatively novel\u2014and selling the repositioned assets. \u201cWe thought the best way to approach it was to be lean and mean and try to have a small organization, maybe an analyst and an assistant,\u201d he recalled. Initially, the company outsourced property and construction management, functions that they would later bring in house.<\/p>\n

Naming their company Waterton Associates, a name inspired by a trip to Waterton Lakes National Park in Alberta, Canada, the partners bought their first asset, the 342-unit Oak Run Apartments in Austin, Texas, in January 1996. That May, they launched a $9.2 million fund backed by the Pritzkers<\/a>, the Chicago dynasty behind the Hyatt brand. Other early investors included the California State Teachers\u2019 Retirement System<\/a>, with which Waterton has sponsored four funds over the past 10 years. \u201cThat\u2019s a testament to our company,\u201d Vilim said.\u00a0Vilim and Schwartz have gradually introduced new business lines over the years. Its property management affiliate debuted in November 1998, and Waterton made its first hotel investment in January 2006. That July saw the launch of Waterton Commercial Properties. All told, Waterton has sponsored 12 funds; its most recent, Venture XII, is also its second commingled fund.<\/p>\n

Waterton had $1 billion in assets under management by 2002. The total reached $3 billion in 2007, also the first year it completed<\/p>\n

\"the<\/a>

Chicago’s\u00a0Presidential Towers<\/p><\/div>\n

$1 billion worth of transactions. All told, the company has invested more than $5 billion through funds and individual transactions, realized aggregate net IRRs of about 20 percent, and has yet to default on a loan or lose an asset to foreclosure.\u00a0In 2007, Waterton acquired its largest multifamily property to date: the 2,346-unit Presidential Towers in Chicago\u2019s West Loop. In a highly competitive bidding process, Waterton bought the four-tower property from Pritzker Realty Group for $470 million.<\/p>\n

New Directions<\/strong>
\nThe Great Recession, too, prompted new directions. Early in 2008, Waterton had finished a $222 million fundraising. At that time, a sudden surge of high-quality distressed properties coming to market caused Schwartz and Vilim to rethink their emphasis on value-add assets. \u201cWe had just bought our first property in the fund and then the wheels started to come off the economy,\u201d Vilim recalled. \u201cWe said, \u2018Why don\u2019t we sit on this capital and not invest for a few minutes and see where this shakes out?\u2019 We were blessed to have significant capital in 2009, when the economy really bottomed, and the guts to start deploying it.\u201d
\nRedirecting the fund toward core and core-plus assets at a significant discount, Waterton invested the bulk of its capital in 2010. That year, Schwartz and Vilim launched Ultima Hospitality, which was an active buyer in 2012 and 2013 as the sector\u2019s recovery lagged.<\/p>\n

The company continues to diversify. A joint venture formed in May with Allianz Real Estate of America L.L.C. and Clal Insurance intends to buy up $800 million worth of core and core-plus multifamily assets in Boston, Chicago, Seattle, Northern California, the New York City metro region and Washington, D.C.. Waterton will manage the properties.
\nAs a new milestone approaches, Vilim and Schwartz note that success has sometimes taken unexpected forms. \u201cOur plan was to buy assets, not hold them, and sell them to the REITs,\u201d Schwartz said. \u201cFast forward to today and we have 2,000 people. We\u2019re fat and nice and we never sold to REITs.\u201d Those employees, Schwartz said, are \u201crelishing the opportunity\u201d to move forward under one name.<\/p>\n

\u201cThey are highly charged to accomplish something that we think no one has really accomplished yet,\u201d he said. \u201cI think this has set us up for the next 20 years quite well.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

As Waterton Associates starts its third decade, its founders are about to open the company\u2019s latest chapter.<\/p>\n","protected":false},"author":1068,"featured_media":1004129325,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21782,21783,21744],"tags":[],"class_list":["post-1004129317","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-development","category-investment","category-people"],"acf":[],"yoast_head":"\nProfile: Waterton's Smooth Blend - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/october-issue-profile-watertons-smooth-blend\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Profile: Waterton's Smooth Blend\" \/>\n<meta property=\"og:description\" content=\"As Waterton Associates starts its third decade, its founders are about to open the company\u2019s latest chapter.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/october-issue-profile-watertons-smooth-blend\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2015-10-16T03:04:17+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-04-23T07:06:05+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/10\/Presidential-Towers.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"549\" \/>\n\t<meta property=\"og:image:height\" content=\"480\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Gail Kalinoski\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/october-issue-profile-watertons-smooth-blend\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/october-issue-profile-watertons-smooth-blend\/\",\"name\":\"Profile: Waterton's Smooth Blend - 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