Real estate money managers and institutional investors are starting to develop properties for the first time since the financial crisis brought most construction projects to a halt.
They are particularly interested in building multifamily projects and hotels in hot, mostly coastal, markets where demand is exceeding supply, real estate managers say.
The C$5.7 billion (US$5.6 billion) Ontario Municipal Employees Retirement System's real estate investment unit, Oxford Properties Group, Toronto, has a joint venture with Related Cos., a New York-based real estate development company, on a $15 billion residential and commercial project on Manhattan's West Side known as Hudson Yards. Oxford also announced in December a 50/50 joint venture with Gould Property Co., Washington, to develop a 620,000-square-foot office building in Washington.
The C$176.2 billion Caisse de Depot et Placement du Quebec's real estate investment arm, Ivanhoe Cambridge, Montreal, is building with co-investor and developer Hines a 45-story office tower and 1.5-acre public park in Chicago's West Loop.
The $258.3 billion California Public Employees' Retirement System, Sacramento, and the $161.5 billion California State Teachers' Retirement System, West Sacramento, each bought stakes in separate real estate investment management and development firms last year. CalPERS invested about $100 million in Bentall Kennedy (US) LP, making it a one-third owner. CalSTRS bought 90% of LCOR Inc.
“We believe it's a great time to develop stabilized assets in certain markets,” said Avi Shemesh, principal and co-founder of Los Angeles-based real estate and infrastructure investment firm CIM Group.
CIM Group is developing — along with Harry Macklowe and co-investors — a New York residential tower that will be one of the tallest residential buildings in the U.S. Mr. Shemesh declined to identify the co-investors. CIM Group investors include CalPERS — for which it runs both real estate and infrastructure allocations — and the $72.5 billion New Jersey Division of Investment, Trenton.
“We are building apartments that we believe will achieve very attractive returns on cost. For us, it is a time to generate relatively high returns for that level of risk,” he said.