Updated with correction
It's not just funds-of-funds firms that are increasingly combining with REITs and other operating partners to invest in properties.
Since 2012, alternative investment manager The Blackstone Group LP has entered into three joint ventures with DDR Corp., Cleveland, a shopping center real estate investment trust.
DDR already bought out Blackstone's majority interest in two of the three joint ventures, said Joe Tichar, DDR's senior vice president of corporate operations.
The third — a close to $2 billion portfolio of 71 properties — closed last week.
DDR has joint ventures with other real estate money managers including TIAA-CREF, but DDR executives are very selective in their choice of partners, Mr. Tichar said.
“There's clearly opportunity for joint ventures and consolidation in the retail real estate space, especially with power centers, “ Mr. Tichar said. “If you pool the REITs in our space ... we only control 12% to 15% of the market. It's very fragmented from an ownership perspective.”
DDR also has an established portfolio and relationships with high-quality tenants, he said.
“There's a lot of capital looking to invest in our property type, either direct investments in one-off asset acquisitions or joint ventures,” he said.
“The issue is whether we are interested. Some capital partners want operators to seed new ventures with existing assets from their portfolio.”
DDR executives do not want to give up control or add leverage to existing properties, he said.
“Some managers and investors are seeking out smaller operators that have regional expertise,” said Jacob Roffman, principal and vice president of 13th Floor Investments, a Miami-based real estate money management and development firm,.
The firm has a small commingled fund, but also has a joint venture with Wexford Capital LP, a Greenwich, Conn.-based real estate and hedge fund money manager.
Generally, 13th Floor invests 10% to 30% of a deal from its commingled fund; Wexford invests the remainder with capital from its limited partners.
“Investors have found a lot of situations where redevelopment and development are involved, where co-sponsoring with someone can bring added benefits to the table,” Mr. Roffman said.
