Insurance companies active purchasers and joint venture owners of commercial real estate

Based upon the first nine months of the year investment sales, it looks like the number one preferred asset is residential rental properties especially in the metropolitan area. With record low vacancy rates, coupled with near record high rents, local, national and international investors are seeking to own this asset class.

Real estate investment trusts, private equity funds, private investors, foreign investors are bidding up the purchase price for this asset class. In addition to these investors, insurance companies who have been and continue to be a major source of financing for this asset class have and continue to seek to rewards of ownership of residential rental apartments and other real estate assets.

One insurance company who has been an active owner of residential rental apartments since the early 1940's is the Metropolitan Life Insurance Company, currently known as MetLife. The company built more than 15,000 residential apartments in Manhattan and the Bronx. Their first completed development was the Parkchester housing in the Bronx. This was followed by Stuyvesant Town/Peter Cooper Village and Riverton Houses in Harlem. In 2006, Metlife diversified its real estate equity portfolio, in part through the $5.4 billion sale of Peter Cooper/Stuyvesant Town, one of the largest real estate transactions in world history.

Earlier this year, Denver based REIT; UDR formed UDR/MetLife JV II. The newly formed joint venture wherein each party owns a 50 percent interest in a $1.3 billion portfolio of twelve operating communities containing 2,528 apartment homes. Seven of the twelve communities (1,818) were contributed from the UDR/MetLife I joint venture. In Manhattan, the joint venture acquired Columbus Square, a total of 710 homes, consisting of five recently developed, high rise apartment buildings on the Upper West Side of Manhattan. The joint venture paid $630 million or $887,324 per apartment for Columbus Square.

In October, MetLife announced it will launch a third party asset management business that will build upon its expertise in select private asset sectors, including real estate equity, commercial mortgage and private placement debt.

The firm announced in order to capitalize on its direct real estate capability, MetLife Real Estate Investors has created a real estate equities strategy group, and a real estate debt strategies group. The company currently owns and manages a $10 billion global portfolio of direct equity real estate investments, including office, apartment, retail, industrial and hotel properties.

Two very active insurance companies investing in residential as well as office assets are the Prudential Real Estate Investors (PREI) and Northwestern Mutual Life Insurance Company (Northwestern Investment Management).

In October, SJP Residential Properties broke ground on the Modern, a $500 million apartment development that will eventually include two 47 story towers with 900 apartments. The buildings will be built on a prime eight acre site at the foot of the George Washington Bridge in Fort Lee, New Jersey. SJP Residential Properties, joint venture equity partners include Prudential Real Estate Investors and Northwestern Mutual Life Insurance Company.

Earlier this year, I reported that Nicholas Jahnke, Director at Northwestern Investment Management, told me that the company originated approximately $4.7 billion in debt and $2 billion in equity in 2011 including local market origination of about $850 million for a variety of asset classes. "Everyone is in the market to lend and provide equity", said Mr. Jahnke.

In 2010 Northwestern provided $165 million in financing to a joint venture of Roseland Property and Prudential Real Estate Investors (PREI) (its joint venture equity participant) for The Monaco, located at 475 Washington Boulevard in Jersey City.

In January of 2011, a joint venture of Fisher Development and Northwestern Mutual Investment Management sold, Liberty Towers, two 37 story residential rental buildings in Jersey City, completed in 2003 with a total of 650 apartments to J.P. Morgan Investment Management, who paid $280 million, or $431,000 per apartment unit.

Northwestern has been an investor in a number of residential developments in Battery Park City. The company has been a joint venture partner with the Albanese Organization in the development of the Verdesian and the Solaire, the first luxury residential property constructed in lower Manhattan since the 9/11 terrorist attacks. In 1999 the joint venture developed the Vanguard Chelsea, a 31 story building with 301 units at 77 West 24th Street.

This past July, Northwestern teamed up with New York Life to provide $185 million of debt for the 509 unit, One North Fourth Place in Williamsburg to its partners which include Douglaston Development and its joint venture partners AIG and MacFarlane Partners for a construction mini permanent finance with 13 year term.

Prudential Real Estate Investors (PREI) is the real estate investment management business of Prudential Financial. PREI has been investing in real estate on behalf of institutional clients since 1970, with gross assets global under management of $50.1 billion and in North America $36.6 billion as of June 30, 2012.

PREI have formed joint ventures with a number of real estate owners, developers and managers including Roseland Property Company. and SJP Properties. Bradford Klatt, co principal of Roseland was quoted in the press last year stating "Pru has been our primary development, financial and intellectual partner since the mid 1990s. The companies have done more than $1 billion of business together, and there's another $500 million of development on the slate. The relationship began in 199t with a single rental apartment tower at Port Imperial in West New York, New Jersey.

In September, Roseland whose equity partner is PREI recently broke ground  in a $275 million venture for a 176 unit apartment complex, in East Boston, known as Portside at Pier One Project.

Last year, MRA Plaza Apartments I Urban Renewal LLC, a joint venture of PREI, Roseland Property, Applied Development and Matrix Development Group, sold the 415 unit Class A mid rise apartment complex "The Highlands at Plaza Square" located in downtown New Brunswick, New Jersey. The purchaser who paid $112.5 million for the development completed in 2004 was Highland Urban Renewal LLC; an entity controlled by Manulife Financial Corporation thorough its U.S. subsidiary John Hancock Life Insurance Company (U.S.A).

PREI has been investor over the past decade with SJP Properties. A few years ago New Jersey based SJP Properties, entered the New York City condominium market in the ground up development of 45 Park Avenue at 37th Street and the Platinum on Eighth Avenue and West 46th Street. SJP's joint venture equity partner in these developments was Prudential Real Estate Investors.

TIAA-CREF is one of the largest institutional real estate investors in the U.S. TIAA-CREF began direct investment in commercial real estate in 1947. It has more than $18 billion of primary high quality properties in the office, retail, industrial and multifamily sectors across the U.S., Canada, and Western Europe.

This summer, TIAA-CREF acquired the 371 unit, Mass Court Apartments at 300 Mass Avenue in Washington, D.C. It paid $168.4 million or $454,000 per apartment, at a 3.98 percent cap rate.

Earlier this year, the pension fund manager and institutional investor, purchased a retail condominium at 225 West 83rds Street for $44.73 million. Retail tenants in the building include a Chico's clothing store and Charles Schwab.

In June 2011, it purchased the land beneath the office building at 425 Park Avenue. According to city records, the purchase price for the land was $315 million. Earlier in the month, TIAA-CREF purchased the 196 units residential rental apartment component of the mixed-use tower The Corner at 200 West 72nd, paying approximately $209 million, o $1,066,326 per apartment or about $1,400 per square foot.

In July 2010, TIAA-CREF acquired 685 Third Avenue, a 635,000-square-foot office building for approximately $190 million. The property previously served as one of the headquarters buildings for pharmaceutical giant Pfizer, and, according to the TIAA website, will be repositioned as a multi-tenant office building. In February of 2011, TIAA-CREF and the $71 billion sovereign wealth fund, Future Fund of Melbourne, Australia, formed a joint venture to co-invest in real estate. As part of the deal, Future Fund purchased a 50 percent interest in 685 Third Avenue.

Other active investors in real estate ownership are the New York Life Investment Management Company, an indirect, wholly owned subsidiary of New York Life Insurance Company. According to their website, NYLIM manages a portfolio of real estate equity investments and is seeking to acquire institutional quality properties nationwide. Their typical investment size is $10 to $100 million per transaction as well as larger projects on a select basis. They are interested in office, multi-family, industrial and grocery anchored retail centers.

Cornerstone Real Estate Advisors, LLC, is an indirect subsidiary of the Massachusetts Mutual Life Insurance Company. The company founded in 1994 to manage MassMutual's equity real estate investments has investments in office, residential, retail, industrial and hospitality assets. In 2011, Cornerstone purchases the 174 room Algonquin Hotel in Midtown Manhattan.

 

Posted on November 1, 2012 .