JPMorgan Asset Management is looking to focus more on development opportunities within the US office sector in 2012, according to the US head of the global banking giant’s opportunistic real estate investment arm.
Kevin Faxon, managing director in charge of Americas real estate within JPMorgan’s Global Real Assets group, told PERE that the firm plans to invest in more ground-up development projects in the upcoming year. “In our mind, office development in 2012 will be akin to multifamily development in 2009 and 2010,” he said.
Like with many private equity real estate platforms, JPMorgan saw considerable opportunities over the past few years to invest in the construction of multifamily assets. With strong demand and scarcity of capital, the sector saw competitive pricing. However, JPMorgan – like many competing firms – was not active in office development over the past year since there was “virtually zero construction” in the gateway cities.
Looking forward, JPMorgan is beginning to find office projects in such cities as New York, Boston, Washington DC and San Francisco appealing for many of the same reasons that multifamily was attractive in 2009 and 2010. “You want to go where capital is scarce,” said Faxon. “The development profits are there and you can get paid for taking the risk.” Additionally, because the lead times for delivery are between 36 and 48 months, office development needs to be an early cycle, rather than a late cycle, play, he noted.
JPMorgan made between $750 million and $1 billion in value-added and opportunistic investments in the US in 2011. Faxon believes the firm will complete at least that much in 2012.
As of 30 September 2011, JPMorgan’s 225-strong US real estate group manages more than $30 billion in assets across a range of core, value-added and opportunistic strategies on behalf of institutional, sovereign and high-net-worth investors. The Global Real Assets group has approximately $56.9 billion in assets under management and 405 professionals in the US, Europe and Asia.