Executive Summary
Warm Springs Capital is pleased to present a unique and compelling investment opportunity through its latest offering, the Warm Springs Capital Fund (the "Fund"). The Fund aims to capitalize on the current market dynamics and the firm's proven track record of delivering superior risk-adjusted returns by investing in a diversified portfolio of real estate assets across the United States and select international markets.
The Fund seeks to raise $1 billion in equity capital, targeting a net IRR of 15% and a net equity multiple of 2.0x over its seven-year term. Warm Springs Capital, with its deep market expertise, extensive network of relationships, and disciplined investment approach, is well-positioned to execute on this strategy and create significant value for its investors.
Market Overview
The current real estate investment landscape presents a compelling opportunity for the Fund, driven by several key factors:
1. Economic Recovery: As the global economy continues to recover from the impact of the COVID-19 pandemic, real estate fundamentals are improving across most markets and asset classes. According to the International Monetary Fund, global GDP is projected to grow by 6% in 2021 and 4.4% in 2022, providing a supportive backdrop for real estate investment. This economic recovery is expected to drive increased demand for real estate across various sectors, including multifamily, industrial, office, and senior housing.
2. Low Interest Rate Environment: Despite recent increases, interest rates remain at historically low levels, with the Federal Reserve signaling a gradual and measured approach to monetary policy normalization. This low-rate environment is expected to persist in the near term, providing an attractive financing environment for real estate investors. Lower borrowing costs can enhance returns and allow for more flexibility in acquisition and development strategies.
3. Demographic Trends: The United States is experiencing significant demographic shifts, including the aging of the Baby Boomer generation and the rise of the Millennial cohort. These trends are driving demand for specific real estate asset classes, such as senior housing, multifamily, and industrial properties. As Baby Boomers age, the demand for senior housing options, including independent living, assisted living, and memory care facilities, is expected to increase significantly. Meanwhile, Millennials are driving demand for rental housing in urban and suburban markets, as well as for e-commerce and logistics facilities that support their shopping habits.
4. Institutional Capital Flows: Institutional investors continue to allocate capital to real estate as a means of diversification and income generation. According to Preqin, global real estate assets under management reached $1.2 trillion in 2020, with institutional investors planning to increase their allocations to the asset class over the next five years. This influx of institutional capital is expected to provide a stable and growing source of demand for real estate investments, particularly in core and core-plus strategies.
Investment Strategy
The Fund will pursue a value-add and opportunistic investment strategy, targeting a diversified portfolio of real estate assets across the following sectors:
1. Multifamily: The Fund will invest in high-quality multifamily properties in markets with strong population and job growth, focusing on assets that can benefit from operational improvements and capital upgrades. These improvements may include unit renovations, common area enhancements, and the addition of amenities such as fitness centers, co-working spaces, and package delivery systems. The target allocation for this sector is 30-40% of the Fund's capital.
2. Industrial: The Fund will target industrial properties, including warehouses and distribution centers, in key logistics markets with strong demand drivers, such as e-commerce growth and supply chain optimization. The focus will be on properties that are well-located near major transportation hubs and have the potential for lease-up, rent growth, and/or development. The target allocation for this sector is 20-30% of the Fund's capital.
3. Office: The Fund will selectively invest in office properties in markets with diverse economic drivers and strong tenant demand, focusing on assets that can be repositioned or redeveloped to meet the evolving needs of tenants. This may include updating building systems, improving energy efficiency, adding amenities, and creating flexible and collaborative workspaces. The target allocation for this sector is 10-20% of the Fund's capital.
4. Senior Housing: The Fund will invest in senior housing properties, including independent living, assisted living, and memory care facilities, in markets with favorable demographic trends and limited supply. The focus will be on properties that offer a continuum of care, have a strong operating partner, and can benefit from improved occupancy and rate growth. The target allocation for this sector is 10-20% of the Fund's capital.
5. Opportunistic: The Fund will also pursue opportunistic investments in other sectors, such as retail, hospitality, and student housing, as well as in special situations, such as distressed or non-performing loans. These investments will be evaluated on a case-by-case basis and will depend on market conditions and the availability of attractive risk-adjusted returns. The target allocation for this sector is 10-20% of the Fund's capital.
The Fund will target assets in the $50-200 million range, with a focus on markets that exhibit strong economic fundamentals, favorable demographic trends, and attractive risk-adjusted return prospects. These markets may include primary markets such as New York, Los Angeles, and Chicago, as well as secondary markets with strong growth potential, such as Austin, Nashville, and Salt Lake City.
In addition to traditional value-add strategies, the Fund will also seek to create value through active asset management, operational improvements, and strategic capital investments. This may include implementing best-in-class property management practices, leveraging technology to improve efficiency and tenant experience, and pursuing ESG initiatives to reduce operating costs and enhance asset value.
Warm Springs Capital's Track Record
Warm Springs Capital has a proven track record of delivering superior risk-adjusted returns to its investors across multiple market cycles. Since its founding in 1998, the firm has invested over $10 billion of equity capital in more than 200 real estate transactions, generating a gross IRR of 22% and a gross equity multiple of 2.5x.
The firm's success is driven by its disciplined investment approach, which combines rigorous underwriting, active asset management, and a focus on downside protection. Warm Springs Capital's team of over 100 professionals has deep expertise across all major real estate sectors and markets, enabling the firm to identify and execute on attractive investment opportunities.
Some of Warm Springs Capital's notable recent transactions include:
1. Multifamily Portfolio Acquisition: In 2020, Warm Springs Capital acquired a portfolio of 10 multifamily properties totaling 3,500 units in high-growth markets such as Atlanta, Dallas, and Phoenix for $750 million. Through operational improvements and capital upgrades, the firm has increased occupancy from 85% to 95% and achieved an average rent growth of 10%, generating a gross IRR of 25% to date. The portfolio is expected to generate additional value through the implementation of a comprehensive unit renovation program and the addition of new amenities such as package lockers and pet washing stations.
2. Industrial Development: In 2019, Warm Springs Capital formed a joint venture with a leading industrial developer to develop a 2 million square foot logistics park in Southern California. The $500 million project, which was completed in 2021, is now fully leased to high-quality tenants such as Amazon and FedEx, generating a gross IRR of 30%. The project was designed to meet the highest standards of sustainability and efficiency, with features such as solar panels, electric vehicle charging stations, and drought-tolerant landscaping.
3. Office Redevelopment: In 2018, Warm Springs Capital acquired a 500,000 square foot office building in downtown Chicago for $200 million. The firm executed a comprehensive redevelopment plan, including lobby and common area renovations, new tenant amenities, and the creation of a food hall and event space. The property is now 95% leased, with an average rent increase of 25%, generating a gross IRR of 20%. The redevelopment also included significant ESG initiatives, such as the installation of a green roof, the use of recycled materials, and the implementation of energy-efficient building systems.
These transactions demonstrate Warm Springs Capital's ability to identify attractive investment opportunities, execute on value-add strategies, and generate superior returns for its investors. The firm's hands-on approach, local market knowledge, and extensive network of relationships have been key drivers of its success.
Fund Terms and Governance
The Fund is seeking to raise $1 billion in equity capital from a select group of institutional investors, with a minimum investment of $10 million. The Fund will have a seven-year term, with the option to extend for two additional one-year periods.
Warm Springs Capital will commit at least 2% of the total capital raised, aligning its interests with those of its investors. The Fund will charge a management fee of 1.5% of committed capital during the investment period and 1.5% of invested capital thereafter. The Fund will also charge a 20% carried interest above an 8% preferred return to investors.
The Fund will be governed by an Independent Advisory Committee (IAC), composed of representatives from the Fund's largest investors. The IAC will provide oversight and guidance on key decisions, such as conflicts of interest, valuation, and significant transactions. The IAC will meet quarterly and will have the authority to approve or reject certain actions proposed by Warm Springs Capital.
Warm Springs Capital is committed to the highest standards of transparency, reporting, and investor communication. The firm will provide quarterly financial statements, annual audited financial statements, and regular investor updates on the Fund's performance and portfolio. Investors will have access to a secure online portal where they can view their account information, transaction history, and tax documents.
In addition to financial reporting, Warm Springs Capital will also provide investors with detailed information on the Fund's ESG performance and impact. This will include regular reports on energy and water usage, greenhouse gas emissions, and other key sustainability metrics, as well as case studies on the social and economic impact of the Fund's investments.
ESG Integration
Warm Springs Capital is committed to integrating environmental, social, and governance (ESG) considerations into its investment process and asset management practices. The firm believes that a focus on ESG can create long-term value for its investors while also positively impacting the communities in which it invests.
The Fund will incorporate ESG factors into its investment underwriting, due diligence, and asset management processes. This includes evaluating the energy efficiency, water usage, and carbon footprint of potential investments, as well as the social impact of its projects on local communities. The Fund will also seek to partner with operators and developers who share its commitment to sustainability and social responsibility.
Warm Springs Capital has developed a proprietary ESG scoring system that assesses potential investments based on a range of criteria, including:
- Energy efficiency and renewable energy usage
- Water conservation and management
- Waste reduction and recycling
- Indoor air quality and tenant health and wellness
- Community engagement and social impact
- Diversity, equity, and inclusion
- Corporate governance and transparency
Investments that score highly on these criteria will be prioritized, while those that do not meet the Fund's ESG standards will be avoided or subject to additional scrutiny.
Once an investment is made, Warm Springs Capital will work closely with its operating partners to implement ESG best practices and track performance over time. This may include:
- Conducting energy audits and retrofits to reduce energy consumption and costs
- Installing water-efficient fixtures and landscaping to reduce water usage
- Implementing waste reduction and recycling programs to minimize environmental impact
- Providing green cleaning and pest control services to improve indoor air quality
- Offering health and wellness amenities such as fitness centers, healthy food options, and outdoor spaces
- Engaging with local community organizations and supporting charitable causes
- Promoting diversity, equity, and inclusion in hiring and contracting practices
- Maintaining strong corporate governance practices and transparency in reporting
Warm Springs Capital will also seek to align its investments with the United Nations Sustainable Development Goals (SDGs), which provide a framework for addressing global challenges such as poverty, inequality, and climate change. The firm will report on its progress towards these goals and will seek to create positive social and environmental impact through its investments.
Risk Factors
Investing in real estate involves significant risks, including market risk, interest rate risk, credit risk, and liquidity risk. The Fund will employ a rigorous risk management framework to mitigate these risks, including diversification across sectors and markets, conservative underwriting assumptions, and active asset management.
Market risk refers to the potential for changes in property values, rental rates, and occupancy levels due to economic, demographic, or other market factors. To mitigate this risk, the Fund will invest in a diversified portfolio of properties across multiple markets and sectors, and will focus on assets with strong long-term fundamentals.
Interest rate risk refers to the potential for changes in interest rates to impact the Fund's borrowing costs and property values. To mitigate this risk, the Fund will use a mix of fixed and floating-rate debt, and will seek to maintain a conservative leverage ratio of 60-65%. The Fund will also focus on assets with strong cash flows and the ability to absorb higher interest rates.
Credit risk refers to the potential for defaults or bankruptcies among the Fund's tenants, borrowers, or counterparties. To mitigate this risk, the Fund will conduct thorough due diligence on all potential investments, including credit analysis of tenants and guarantors. The Fund will also diversify its tenant base and will seek to maintain a weighted average lease term of 5-7 years.
Liquidity risk refers to the potential for the Fund to be unable to sell assets or raise capital in a timely manner. To mitigate this risk, the Fund will focus on assets with strong liquidity characteristics, such as those in major markets with deep investor demand. The Fund will also maintain a prudent level of cash reserves and will have the ability to draw on a credit facility to meet short-term liquidity needs.
In addition to these risks, the Fund may also be subject to other risks such as political risk, currency risk, and tax risk, particularly in its international investments. Warm Springs Capital will work closely with local partners and advisors to navigate these risks and will seek to structure its investments to minimize exposure.
Conclusion
The Warm Springs Capital Fund presents a unique and compelling investment opportunity, backed by the firm's proven track record of success, deep market expertise, and disciplined investment approach. By investing in a diversified portfolio of real estate assets across the United States and select international markets, the Fund is well-positioned to capitalize on the attractive market dynamics and generate superior risk-adjusted returns for its investors.
With a target raise of $1 billion, a net IRR of 15%, and a net equity multiple of 2.0x, the Fund offers investors the potential for significant capital appreciation and income generation over its seven-year term. Warm Springs Capital's commitment to ESG integration and investor transparency further distinguishes the Fund as a responsible and sustainable investment choice.
We invite qualified investors to join us in this exciting investment opportunity and to benefit from Warm Springs Capital's expertise, network, and track record of success. For more information or to request a detailed offering memorandum, please contact our Investor Relations team.
Appendix: Case Studies
Multifamily Acquisition: Sunnyside Apartments, Phoenix, AZ
In 2019, Warm Springs Capital acquired Sunnyside Apartments, a 500-unit multifamily property in Phoenix, Arizona, for $100 million. The property was well-located in a high-growth submarket but suffered from deferred maintenance and operational inefficiencies.
Warm Springs Capital implemented a comprehensive value-add strategy, including:
- Renovating 100% of unit interiors with new flooring, appliances, and fixtures
- Upgrading common areas with new furniture, artwork, and lighting
- Adding new amenities such as a fitness center, business center, and outdoor lounge areas
- Implementing a new property management platform and leasing strategy
- Installing energy-efficient lighting and water-saving fixtures throughout the property
As a result of these initiatives, the property achieved:
- A 20% increase in net operating income
- A 50% increase in property value
- A 95% occupancy rate and 10% average rent growth
- A 30% reduction in energy and water usage
Warm Springs Capital exited the investment in 2022, generating a gross IRR of 28% and a gross equity multiple of 2.8x for its investors.
Industrial Development: Logisticenter at Port of Long Beach, CA
In 2016, Warm Springs Capital formed a joint venture with a leading industrial developer to develop Logisticenter at Port of Long Beach, a 1.5 million square foot logistics park in Southern California. The $400 million project was well-located near the Port of Long Beach, a key gateway for international trade.
Warm Springs Capital leveraged its expertise in industrial real estate and its relationships with key tenants to:
- Pre-lease 80% of the project prior to completion
- Secure long-term leases with high-quality tenants such as Amazon, UPS, and Ikea
- Implement sustainable design features such as solar panels, electric vehicle charging stations, and water-efficient landscaping
- Achieve LEED Gold certification for the entire project
The project was completed in 2018 and achieved:
- 100% occupancy with a weighted average lease term of 10 years
- Rents that were 20% above pro forma
- A gross IRR of 35% for its investors
- A 50% reduction in energy usage and greenhouse gas emissions
Warm Springs Capital continues to hold the asset and expects to generate additional value through the lease-up of the remaining space and the potential for future rent growth.
Office Repositioning: Tower Place, Atlanta, GA
In 2017, Warm Springs Capital acquired Tower Place, a 750,000 square foot office complex in Atlanta, Georgia, for $150 million. The property was well-located in the Buckhead submarket but suffered from high vacancy and dated building systems.
Warm Springs Capital implemented a comprehensive repositioning plan, including:
- Renovating the lobby and common areas with new finishes, furniture, and artwork
- Adding new tenant amenities such as a conference center, fitness center, and rooftop terrace
- Upgrading building systems to improve energy efficiency and tenant comfort
- Implementing a targeted leasing strategy to attract high-quality tenants in growth industries such as technology, media, and healthcare
- Pursuing LEED certification to demonstrate the property's commitment to sustainability and efficiency
As a result of these initiatives, the property achieved:
- A 30% increase in occupancy, from 60% to 90%
- A 25% increase in rental rates, with new leases signed at $35-40 per square foot
- A 20% reduction in operating expenses through energy efficiency and other cost-saving measures
- LEED Gold certification, making it one of the most sustainable office properties in the market
Warm Springs Capital exited the investment in 2021, generating a gross IRR of 22% and a gross equity multiple of 2.3x for its investors. The property has since been recognized as a premier office destination in the Atlanta market and has continued to attract high-quality tenants.
These case studies demonstrate Warm Springs Capital's ability to identify attractive investment opportunities, execute on value-add strategies, and generate superior returns for its investors across different property types and market cycles. The firm's hands-on approach, deep market knowledge, and commitment to sustainability and tenant satisfaction have been key drivers of its success.
By investing in the Warm Springs Capital Fund, investors can gain exposure to a diversified portfolio of real estate assets and benefit from the firm's proven track record of delivering strong risk-adjusted returns. With a disciplined investment strategy, rigorous underwriting process, and active asset management approach, Warm Springs Capital is well-positioned to continue its legacy of success and create long-term value for its investors.
Investment Process and Due Diligence
Warm Springs Capital employs a rigorous and disciplined investment process to identify, evaluate, and execute on attractive real estate investment opportunities. The firm's investment team consists of experienced professionals with deep knowledge of real estate fundamentals, market dynamics, and value creation strategies.
The investment process begins with a top-down analysis of macroeconomic trends, demographic shifts, and market conditions to identify target markets and sectors that offer compelling risk-adjusted return potential. The team then conducts a bottom-up analysis of individual properties, evaluating factors such as location, building quality, tenant mix, lease terms, and cash flow potential.
Once a potential investment opportunity is identified, Warm Springs Capital conducts extensive due diligence to validate its investment thesis and underwriting assumptions. This includes:
- Site visits and property inspections to assess the physical condition and market positioning of the asset
- Tenant interviews and lease reviews to evaluate the credit quality and stability of the rent roll
- Financial modeling and sensitivity analysis to stress-test cash flow projections and return assumptions
- Environmental and engineering studies to identify any potential risks or liabilities
- Legal and title review to ensure clear ownership and marketable title
Warm Springs Capital also leverages its extensive network of industry relationships to gain insights and intelligence on market trends, comparable transactions, and potential off-market opportunities. The firm's reputation as a reliable and trusted partner has enabled it to source many of its most successful investments through proprietary channels.
Once an investment opportunity has been thoroughly vetted and approved by the investment committee, Warm Springs Capital works to efficiently execute the transaction and implement its value creation strategy. The firm's in-house asset management team works closely with local property managers and leasing agents to optimize property performance and drive value through operational improvements, capital upgrades, and leasing initiatives.
Throughout the hold period, Warm Springs Capital closely monitors property performance and market conditions to identify potential risks and opportunities. The firm employs a proactive asset management approach, regularly engaging with tenants, vendors, and other stakeholders to ensure that each property is meeting its financial and operational objectives.
When the time comes to exit an investment, Warm Springs Capital works to maximize value for its investors through a carefully planned and executed disposition strategy. The firm's extensive relationships with buyers and brokers across the industry enable it to efficiently market properties and achieve attractive pricing and terms.
Experienced and Aligned Management Team
Warm Springs Capital is led by a highly experienced and aligned management team with a proven track record of success in real estate investing. The firm's senior leadership team has an average of over 25 years of experience in real estate and has collectively invested over $30 billion of capital across multiple market cycles.
The firm's co-founders, John Smith and Jane Doe, have worked together for over 20 years and have built Warm Springs Capital into one of the most respected and successful real estate investment firms in the industry. Prior to founding Warm Springs Capital, John and Jane held senior leadership positions at leading real estate investment firms such as Blackstone and Carlyle, where they were responsible for sourcing, executing, and managing billions of dollars of real estate investments.
Warm Springs Capital's senior leadership team is supported by a deep bench of talented investment professionals, asset managers, and operational experts who bring a diverse range of skills and experiences to the firm. The team's expertise spans across all major real estate sectors and markets, enabling the firm to identify and execute on a wide range of investment opportunities.
Importantly, Warm Springs Capital's management team is highly aligned with its investors through a significant personal investment in the Fund. The firm's principals and employees are collectively investing over $50 million in the Fund, ensuring that their interests are closely aligned with those of the Fund's investors.
Conclusion
The Warm Springs Capital Fund represents a unique and compelling opportunity for investors to gain exposure to a diversified portfolio of high-quality real estate assets, backed by a proven investment strategy and a highly experienced and aligned management team. With a target raise of $1 billion and a focus on value-add and opportunistic investments across multiple sectors and markets, the Fund is well-positioned to capitalize on the attractive market dynamics and generate superior risk-adjusted returns for its investors.
Warm Springs Capital's disciplined investment process, hands-on asset management approach, and commitment to ESG principles further distinguish the Fund as a responsible and sustainable investment choice. By partnering with Warm Springs Capital, investors can benefit from the firm's deep industry knowledge, extensive network of relationships, and proven track record of success.
We believe that the current market environment presents a compelling opportunity for real estate investment, and we are confident in our ability to navigate the challenges and opportunities ahead. With a talented and dedicated team, a robust pipeline of attractive investment opportunities, and a strong alignment of interests with our investors, we are excited to launch the Warm Springs Capital Fund and to deliver superior returns for our investors.
We invite you to join us in this exciting investment opportunity and to benefit from the many advantages of partnering with Warm Springs Capital. For more information or to discuss the Fund in greater detail, please contact our Investor Relations team at (555) 123-4567 or investments@wsc.com.
Thank you for your consideration, and we look forward to the opportunity to work with you.
Sincerely,
1. James Westfield - Chief Executive Officer (CEO)
2. Sarah Thompson - President and Chief Investment Officer (CIO)
3. Michael Chen - Chief Financial Officer (CFO)
4. Emily Thompson - Chief Operating Officer (COO)
5. David Lee - Head of Asset Management
6. Rachel Johnson - Head of Investor Relations
7. Michael Kim - Head of Acquisitions
8. Emily Johnson - Senior Vice President of Acquisitions
9. David Chen - Head of Portfolio Management
