Those who have committed to Fund II consist of "several top-tier institutional investors," according to Michael K. Hayde, chief executive officer of locally based Western National. He notes that this was the initial closing of Fund II and that its final close, to take place in 2008, will total at least $300 million of equity commitments.

Fund II is focused solely on multifamily acquisitions and development projects. The current investors include primarily major state employee pension funds, life insurance companies and investment banks, but also include many of Western National's long-term high-net-worth investors.

Hayde says that although institutional demand for multifamily in Southern California remains steady, "The institutions are more selective" now. He explains that they are seeking vertically integrated multifamily firms with strong track records, long-term, multi-cycle experience by management and a focus on quality assets in top-tier markets.

Before the creation of Fund II, Western National Properties had created Fund I, which leveraged its $50 million in equity commitments from high-net-worth individuals by adding an additional $20 million from joint-venture partners. Fund I initially closed in March 2005 and was fully invested into seven transactions by January 2007. The seven Fund I transactions totaled 1,491 apartment units in a mix of both acquisitions and development projects diversified across Los Angeles, Riverside, San Bernardino, San Diego and Orange counties.

Fund II, immediately following its initial close, acquired a site for a ground-up development in the Warner Center-area of Woodland Hills, CA. The development will consist of a 195-unit, four -story apartment complex wrapped around a five-and-a-half-story parking structure.

Hayde observes "a positive change in the market" with respect to pricing. "Whereas in the last three or four years, there had been for-sale condominium builders paying two to three times the amount multifamily developers could pay for land, that activity has virtually halted," the Western National CEO explains. He says that Western National is now looking at acquiring not only vacant land initially purchased by these condominium builders but now at much lower prices, but also broken condominium projects that are in various stages of construction but no longer work as for-sale projects.

Meanwhile, while the for-sale market continues to decline, the multifamily markets are performing well, Hayde points out. He notes that multifamily vacancy in Southern California is at a very low 4% to 5%, adding, "We're still enjoying at least 4% annual rent growth, so we see a very positive picture right now."

Western National's growth plans include the entire company's activities. In addition to its acquisition and development arm, Western National Group also includes Western National Contractors and Western National Property Management. The contracting arm will handle the construction of new multifamily communities for Fund II, and for selected third-party owners, and will also complete capital improvements on all Fund II value-add properties. Western National Property Management will handle the property management of all Fund II properties.