Nuveen has launched the latest offering in its growing lineup of open-ended real estate funds.
The US Cities Multifamily Fund will invest in core institutional multifamily properties, with the intention of providing investors with long-term cashflow. The first close of the fund has been anchored by an unnamed public pension, which committed $450 million and sold the nine assets to Nuveen Real Estate to seed the fund’s portfolio. In exchange for the assets, the pension received partnership interest in the fund. The firm declined to provide additional detail about the transaction.
Nuveen Real Estate’s parent company, nonprofit investment manager TIAA, also committed $100 million. As for investment return targets, the fund will use the multifamily component of the National Council of Real Estate Investment Fiduciaries’ open-ended diversified core return index as a benchmark.
“When we thought about the fundraising, we knew that what was important to investors was to have a strong anchor investor and a seed portfolio,” said Nuveen Real Estate managing director Nikita Rao, who will be managing the US Cities Multifamily Fund portfolio. “We provided investors with the information needed to underwrite the fund.”
Though the London-based firm already has closed-ended multifamily funds focused on a value-add investment strategy, Rao said the firm was approached by investors looking for a multifamily-focused real estate fund that could provide them with long-term durable cashflow. The firm believed an open-ended fund with a core investment strategy that targeted middle income renters would provide investors with the cashflow and resiliency that they desired, she said. Nuveen Real Estate’s base of global institutional investors that want exposure to multifamily properties now have the option of a value-add closed-ended vehicle and a more long-term open-ended vehicle.
The seed portfolio from the anchor investor consists of Class A and B properties that total more than 3,000 rental units. Going forward, the firm aims to acquire more core multifamily rental properties with high, stable occupancy located in top-tier cities across the US. The firm intends to target a base of “MiMis,” a term to describe a renter base of millennials and middle-income households. The MiMi tenant base rents out of necessity rather than choice, which means less fluctuation in demand and a small chance that the market will be disrupted by luxury housing supply, according to Rao.
This is not the first time that Nuveen Real Estate has introduced a property specific open-ended investment vehicle. The firm previously launched open-ended retail property-focused funds – the UK Shopping Centre Fund and Core German Retail Fund – and open-ended logistics funds – the European Logistics Fund, the core-plus German Logistics Fund I and the core German Logistics Fund II.
Nuveen Real Estate also has open-ended vehicles that are not tailored to any one property type. Its open-ended Asia Pacific Cities Fund, which invests in a variety of property types in Asia, launched in November 2018, according to PERE data. Nuveen Real Estate also has European-focused and US- focused open-ended core funds, the European Cities Fund and US Cities Fund, respectively.
Between equity and debt, the firm holds around $17 billion in US multifamily assets under management.