TH Real Estate plans to enter the non-traded real estate investment trust space, PERE has learned.
The London-based real estate subsidiary of investment manager TIAA is launching a vehicle in the coming months, according to sources with knowledge of the vehicle.
“If the new ones are large enough, why couldn’t [the market] support multiple institutional-quality non-traded REITs? There is a lot of room to differentiate around business lines.”
– Phil Owens
A spokeswoman for the firm declined to comment, however PERE understands that the permanent capital vehicle will be focused on stabilized, income-oriented properties in the US, similar to the strategy Blackstone and Starwood Capital Group have in the space.
TH Real Estate plans to raise $2 billion-$5 billion through the vehicle, a source said.
New York-based Blackstone entered the space in August 2016 with Blackstone Real Estate Investment Trust, seeking to raise at least $150 million and up to $5 billion, PERE previously reported. BREIT made its first purchase in January and had corralled $1 billion of equity as of June 30, according to its second-quarter earnings report. Its third-quarter earnings have not yet been released.
Greenwich, Connecticut-based Starwood filed a registration form with the Securities and Exchange Commission earlier this month for the launch of Starwood Real Estate Income Trust. Similar to Blackstone’s BREIT, Starwood intends raise at least $150 million and up to $5 billion through the vehicle.
Other non-traded REITs affiliated with private equity real estate firms include JLL Income Property Trust, a five-year-old, $2.5 billion vehicle that is managed by Chicago-based LaSalle Investment Management and held 69 properties as of September 30, according to its third-quarter earnings report. Meanwhile, New York-based Deutsche Asset Management oversees RREEF Property Trust, which also launched in 2012 and managed eight properties and $172 million in total assets as of June 30, per its second-quarter earnings report.
Houston-based Hines runs two finite-life non-traded REITs, the more recent of which was closed to new investors last month. The company filed with the SEC for a follow-on stock offering for Hines Global REIT II and to restructure it from a closed-ended vehicle into a permanent capital vehicle.
Capital raising in the non-traded REIT space began picking up in the early 2000s and hit a peak in 2013, with $19.9 billion raised, according to Blue Vault’s second-quarter report. Last year, the sector raised $4.6 billion, including $1.09 billion in Q2 2016, similar to Q2 2017’s $0.99 billion.
Despite the decline in overall fundraising, Phil Owens, a managing director at real estate research firm Green Street Advisors, previously told PERE that there is room for expansion.
“The market supported multiple non-traded REITS previously,” Owens said. “In theory, if the new ones are large enough, why couldn’t they support multiple institutional-quality non-traded REITs? There is a lot of room to differentiate around business lines.”
On an earnings call with reporters earlier this month, Blackstone president Tony James said other entrants do not change the firm’s perception of the non-traded REIT space.
“We’re in finance. There’s nothing that’s patentable, so there’s nothing that other smart competitors can’t imitate,” James said. “Our ability to deliver that [quality] consistently – that’s where the magic sauce is, and that’s where I think we distinguish ourselves.”
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