Water is undoubtedly one of the most important molecules for a variety of chemical and physical systems, and constructing precise yet effective coarse-grained (CG) water models has been a high priority for computer simulations. To recapitulate important local correlations in the CG water model, explicit higher-order interactions are often included. However, the advantages of coarse-graining may then be offset by the larger computational cost in the model parameterization and simulation execution. To leverage both the computational efficiency of the CG simulation and the inclusion of higher-order interactions, we propose a new statistical mechanical theory that effectively projects many-body interactions onto pairwise basis sets. The many-body projection theory presented in this work shares similar physics from liquid state theory, providing an efficient approach to account for higher-order interactions within the reduced model. We apply this theory to project the widely used Stillinger-Weber three-body interaction onto a pairwise (two-body) interaction for water. Based on the projected interaction with the correct long-range behavior, we denote the new CG water model as the Bottom-Up Many-Body Projected Water (BUMPer) model, where the resultant CG interaction corresponds to a prior model, the iteratively force-matched model. Unlike other pairwise CG models, BUMPer provides high-fidelity recapitulation of pair correlation functions and three-body distributions, as well as N-body correlation functions. BUMPer extensively improves upon the existing bottom-up CG water models by extending the accuracy and applicability of such models while maintaining a reduced computational cost.