IWS Equity has just launched, and is seeking additional investors for, its new IWS Real Estate Growth Fund, which has a target of $300 million in equity.

Toronto-based IWS Equity was founded in 2019 as a joint venture led by John Ho of Institutional Mortgage Capital (IMC) and Paul Aiello of Wadsworth Mortgage Capital.

Its first equity fund was launched to focus on underserved Canadian mid-market real estate. 

“The next natural space to go into was on the equity side and it really allowed us to service a lot of our clients further down the capital stack,” managing director Melissa Ho told RENX. “Paul Aiello was a natural partner to do it with as we've worked with him for so many years.” 

IWS Equity’s first deal closed in the fall of 2019 and its early days were impacted by the onset of the COVID-19 pandemic a few months later.

It currently has more than $200 million of equity invested through the initial fund and its focus on diversified asset types and locations will continue with the IWS Real Estate Growth Fund.

Self-storage portfolio sale

“We've monetized a couple of investments,” senior managing director and head of relationships Ken McKinnon told RENX. “One was minor and then we were the primary capital behind the self-storage sale last year, which involved a sale to SmartStop through our partner NYX.”

IWS Equity contributed between 70 and 85 per cent of the equity capital needed to acquire, develop and optimize the performance of each asset in the seven-property Greater Toronto Area self-storage portfolio, which included fully operational and development properties acquired during 2019 and 2020.

McKinnon said the company earned a return of over 20 per cent on that transaction. The existing assets in the original fund are meeting targeted return percentages in the teens and low 20s, depending on the investment, he added.

“Our view is that the investment opportunities are certainly better today than what they would have been two or three years ago, just given the general restraints in terms of liquidity in the market,” McKinnon noted. “Higher interest rates have provided opportunities in today's environment that should exceed what we would have seen during the first fund’s investment period.”

IWS Real Estate Growth Fund

The IWS Real Estate Growth Fund has an unnamed anchor investor, described by McKinnon as a Canadian-based family office. He said it has committed to invest up to $100 million as long as it comprises no more than one-third of the fund’s total size.

Family offices, high-net-worth individuals and institutional investors will be the primary targets for the new fund. IWS Equity is seeking investments of $5 million and above, though McKinnon said it will consider smaller sums. 

McKinnon said all of IWS Equity’s principals will also invest in the fund and “have material skin in the game,” which he believes will help attract investors.

The IWS Real Estate Growth Fund is targeting returns of 20 per cent and will offer access to a conservatively managed portfolio of opportunistic, value-add and development investments that are diversified by sector and region.

“One of the nice things about our background on the debt side is we really are comfortable investing across all provinces in Canada and similarly on asset type,” Ho said. 

This includes multifamily rentals, retail, industrial, condominium and land developments, self-storage, mixed-use, office, student and senior living, and manufactured housing communities.

IWS Equity has an active pipeline

“We continue to have an active pipeline and continue to look at new projects,” Ho explained.

An 18-month capital raise period is targeted to hit the $300 million goal. McKinnon expects the first IWS Real Estate Growth Fund investments will be made this spring or summer once a certain minimum amount of capital has been raised.

“We're very bullish on Canada and think this is a fantastic time to invest,” McKinnon said. “Our team is deeply experienced and has gone through many cycles. 

“What we found is the best returns that we’ve generated for our investors — not just in terms of IWS, but in terms of its related company, IMC — has been through times where there was this type of uncertainty.”