Water Asset Management raising $300m second fund – exclusive

Water Asset Management (WAM) is raising a $300 million fund that will invest in water resources across the western US, Agri Investor has learned.

Much like its predecessor fund, Water Property Investor II LP (WPI II) is seeking capital commitments from sovereign wealth funds, pension funds, endowments and family offices, making $10 million to $30 million investments.

But at $300 million it would be more than three times larger than the $95 million Water Property Investor LP (WPI), reflecting increasing demand for water investments in the western US after five years of record drought, Matt Diserio, president and co-founder of WAM, told Agri Investor.

“We see growing opportunity and demand both due to the drought and the growing awareness that access to historical water resources is no longer as reliable,” he said. “A lot more farmers are interested in collaborating with a firm like ours that is focused on developing more reliable water resources.”

WPI II will repurpose water resources then sell them at a higher value to municipal, industrial and environmental consumers. WAM makes value-add investments in farmland, often targeting the western states where old and arguably antiquated laws give some farms higher water appropriations than others.

In a typical scenario, the firm buys a property and then increases water efficiency by some combination of improving irrigation systems, replacing low value crops to higher value ones, or by simply allowing parts of the land to go fallow, later selling or leasing the water rights to those willing to pay a premium.

WPI targeted a net IRR between 17-22 percent, according to the company website, but Diserio would say only that the new fund would target “higher than average ag returns”.

The WPI II portfolio will be made up of approximately 70 percent water-rich agricultural properties and approximately 30 percent stand-alone water resources. WAM will develop and market the water assets while maintaining its partnership with a group of farming partners including RD Offutt, which will manage the farm operations.