TIAA-CREF forms Australia JV with A$3.1bn pipeline

The $487 billion US pension has made its first major foray into Australian private real estate with a co-investment joint venture with listed developer Mirvac.

Teachers Insurance and Annuity Association of America College Retirement Equity Fund (TIAA-CREF) has broken into Australia’s private real estate market with the formation of an alliance with Mirvac Group, an Australian-listed developer and investor.

Under the alliance, the $487 billion New York-based pension fund will have the exclusive first right to all of Mirvac’s Australian prime office co-investment deals sourced or developed over the next three years. For each deal that TIAA-CREF chooses to co-invest in, it is expected to take a 50 percent ownership while Mirvac will take the remaining 50 percent.

Both parties declined to disclose how much TIAA-CREF hopes to invest through this platform over the next three years, but Mirvac chief executive Susan Lloyd-Hurwitz told PERE that Mirvac currently has an office development and deal pipeline of about A$3.1 billion (€2 billion; $2.8 billion) for TIAA-CREF to consider.

While Lloyd-Hurwitz did not expect TIAA-CREF to take up all deals that Mirvac offers, as the pension’s mandate is more focused on assets in Sydney and Melbourne specifically, she expected that it would take up a good number of them. “Collectively, we haven’t gone to the effort of setting up this program to create something that’s not meaningful.” Lloyd Hurwitz also said both Mirvac and TIAA-CREF hope the relationship will continue even after the three years of the alliance.

The alliance is not TIAA-CREF’s first investment in Australian real estate. The pension fund reportedly bought Hunter Street office tower in Sydney's central business district from CLSA Capital Partners for about $96 million in October. However, according to Lloyd-Hurwitz, the deals Mirvac and TIAA-CREF are aiming for will be much larger, with an average ticket size between A$200 million and A$400 million.

TIAA-CREF has been particularly active in private real estate joint venture space in the past year. In February 2013, it announced a joint venture with Norges Bank Investment Management (NBIM), manager of the Norwegian Government Pension Fund Global, to invest in core office properties in Boston, New York and Washington. Then in June, TIAA-CREF joined forces with global asset manager Henderson Global Investors to form TIAA-CREF Henderson Global Real Estate with a combined $19.8 billion of assets across Europe and Asia.