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TIAA-CREF makes first investment in Mirvac JV

The US investment management company will have its 50 percent stake in the Australian office development managed by TIAA Henderson.

New York-based investor Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF) has made its first investment under its A$3.1 billion (€2 billion; $2.8 billion) joint venture with listed developer Mirvac Group.

TIAA-CREF has acquired a 50 percent stake in an office development project at 699 Bourke Street in Melbourne for A$73 million (€49 million; $68 million).

According to company statements, this investment will be managed by TIAA Henderson Real Estate (TH Real Estate), the newly-established property firm’s first new asset brought under management since its official launch this month.

As part of the agreement, TIAA-CREF will fund half the construction costs, and upon completion it and Mirvac will name Mirvac Asset Management the property manager, according to an Australian stock exchange disclosure. The property is fully leased to domestic natural gas and electricity company AGL for a minimum period of 10 years, and completion is expected in 2015.

London-based TH Real Estate will manage TIAA-CREF’s capital for this investment on behalf of the US pension. As a joint venture between TIAA-CREF and investment manager Henderson Global Investors, TH Real Estate has begun its life with $22.6 billion assets under management across 50 funds and mandates. With a network of offices in Asia, Europe and North America, the JV is 60 percent owned by TIAA-CREF and 40 percent owned by Henderson.

However, 699 Bourke Street serves as the firm’s first new asset since its official launch. TH Real Estate is also expected to manage all future such investments made out of the TIAA-CREF-Mirvac alliance.

“We are committed to building a sustainable business [in Australia] over the long term, having built up… strategic relationships with Australian superannuation schemes, [REITs] and property companies,” said Nick Evans, head of Australia and executive director at TH Real Estate. “This well-located, well-leased office property is a valuable addition to our global portfolio.”

TIAA-CREF’s JV with Mirvac gives the investor exclusive first right to all of Mirvac’s prime office deals sourced or developed in Australia over the next three years. For each deal in which TIAA-CREF elects to co-invest, it is expected to take a 50 percent ownership with Mirvac taking the remaining 50 percent. The 699 Bourke Street deal is on the lower range of the A$200 million and A$400 million expected ticket size for the JV’s deals.