Retail, Student Housing Investment Focus For TH Real Estate
A division of TIAA, one of the world's largest real estate investment managers, is putting shopping centers in the southeastern U.S. and Latin America high on its shopping list.
TH Real Estate — the third-party investment management platform of TIAA Asset Management — will focus on urban and neighborhood retail centers in the Southeast this year as part of its expected outlay of billions in equity and debt for 2017. Manuel Martin, head of TH Real Estate's newly opened Miami office, said growing population and income in major Southeast metro areas are making retail properties attractive to investors.
Martin did not give out numbers on how much TH Real Estate expects to spend this year, but it could be in the billions given the company has a more than $96B global platform with capital from TIAA and other institutional investors such as sovereign wealth funds and foreign pension plans. And long-term low rates of return for real estate in Europe have been pushing more money to the U.S., especially in cities like Dallas, Houston, Miami and Atlanta, Martin said. “The U.S. is still going to be a Grade-A investment. We have ahead a couple of good years,” he said.
Retail won't be the sole target; Martin said the firm is looking to invest or place debt in office, industrial, student housing and multifamily projects, although considering the escalating costs with apartments, Martin said investments in that sector will be selective. Recent deals by the firm include a 726-bed student housing project called Greene Crossing near the University of South Carolina, and The Edge at Flagler Village (here), a 332-unit apartment project in Fort Lauderdale that cost the firm more than $110M, or $346k/unit.
In a recent report, TH Real Estate's US head of research, Thomas Park, cited Millennials as a megatrend of growth for commercial real estate. "We are heading into a period of uncertainty, but with a potential tailwind from favourable macro-economic and market conditions," Park wrote. It's not only apartments that benefit. "Millennials are also having a dynamic effect on the office, industrial and retail sectors by virtue of their numbers, their work/life preferences, their mobility and their uses of technology. The impact is most evident in the largest cities and metropolitan areas where Millennials are concentrated, and where TH Real Estate invests. These megatrends point to a positive impact on real estate demand over the long term, even in the event of short-term post-election volatility or uncertainty."
Martin just moved from Madrid, where he was head of TH Real Estate's investments in Spain and Portugal, and he's now expanding his empire with a new Miami office that will look to invest not only in the Southeast as far west as Texas and north as far as North Carolina, but also into Latin America.
Latin America is a little risky, even as the dollar has strengthened in recent months. Political uncertainty is a big factor in the region, especially for Mexico. What will happen to NAFTA under the Trump administration is a wild card, Martin said. TH Real Estate sees a “big city” approach to Latin America, with potential investments in major markets such as Santiago de Chile, Rio de Janeiro and São Paulo. It's already purchased a 36% stake in JK Iguatemi Mall (here), an upscale shopping mall in São Paulo.
There's still a wait-and-see approach to some Latin American cities, but “with the opening of the Miami office, we're going to be watching the region closely,” Martin said.