Normandy makes partial sale to Japanese firm – Exclusive

The Morristown, New Jersey-based private equity real estate firm previously made five co-investments with NTT Urban Development Corporation.

Normandy Real Estate Partners, a Morristown, New Jersey-based real estate operator and fund manager, has sold part of the company to Japanese real estate company NTT Urban Development Corporation, PERE has learned.

NTTUD, a subsidiary of Nippon Telegraph and Telephone, has acquired a 15 percent common equity interest in Normandy’s management platform, the firm’s co-founders and partners, Finn Wentworth, David Welsh and Jeffrey Gronning, wrote in a letter to investors earlier this month seen by PERE. Terms of the transaction were not disclosed in the letter.

NTTUD will be a passive owner in Normandy, and will not have the right to receive carried interest from Normandy’s funds; have representation on its investment committee; or have other day-to-day involvement in the funds management business, the executives said in their letter. Wentworth, Welsh and Gronning will continue to oversee and control the firm and raise capital through commingled real estate funds and joint ventures.

Both firms stand to benefit from the strategic partnership, the executives said. Since establishing a US entity in October 2013, NTTUD has sought to expand its expertise and ownership of commercial real estate properties in high-growth, high-barrier-to-entry US markets. Normandy will serve as its strategic partner in the US northeast.

Meanwhile, “NTTUD’s influence and reputation in Japan will pave the way for introductions between Normandy and the large market of Japanese investors who are interested in investing with a best-in-class operator in the United States,” the executives said in their letter. “Japanese investors are expected to be an important and growing source of equity capital targeting real estate investment in the US. Normandy’s affiliation with a highly-regarded Japanese institution such as NTTUD will leave us strategically well positioned for future growth stemming from this investor base.”

Normandy and NTTUD have been investing together since 2013, when the latter company made a co-investment in Normandy Real Estate Fund III’s 119 W. 25th Street project in New York. Since then, NTTUD has made four co-investments with Normandy, including 1015 18th Street in Washington, DC and 575 Lexington Avenue in New York. Additionally, NTTUD is a limited partner in Normandy’s latest real estate fund, Normandy Real Estate Fund IV.

The deal is understood be the first corporate transaction for NTTUD and the first stake sale for Normandy. Both firms declined to comment.

Normandy, with offices in New York, Boston, Washington, DC and Morristown, New Jersey, is focused primarily on acquiring office and mixed-use investments located in the northeast and mid-Atlantic regions of the US. Its management platform is focused on a value-added strategy consisting of a series of closed-end, fully-discretionary investment funds; and a core-plus strategy consisting of a series of separate accounts for domestic and foreign institutional investors. Normandy currently manages approximately $1.5 billion of equity capital.

NTTUD, listed in the Tokyo Stock Exchange, made its first overseas investment in London in 2009. Its global portfolio currently consists of value-add investments in office, mixed-use and residential land. As of its fiscal year 2015, the company managed ¥1.033 trillion ($9.51 billion; €8.87 billion) in assets.