Investors' appetite for income-producing properties and relative returns, combined with a rise in real estate values, pushed up total worldwide assets of the largest institutional real estate money managers, Pensions & Investments' annual survey shows.
Assets jumped 13.7% to $1.003 trillion in the year ended June 30, reaching the $1 trillion mark for just the second time ever and the first since P&I's 2008 survey.
That compares to a 9% increase a year earlier and an 11.7% rise in P&I's 2012 survey. The growth of U.S. institutional tax-exempt assets in this year's survey continued its upward trajectory, growing 12.5% to $466.3 billion. Of that, real estate equity assets grew 13.1% to $369.5 billion.
Discretionary assets for U.S. institutional tax-exempt investors rose 12% to $383 billion during the period.
Among the 50 largest managers for U.S. institutional tax-exempt clients, assets rose 12.4% to $423.6 billion.
The top 10 managers of U.S. institutional tax-exempt assets account for 59% of the total. As a group, assets of the top 10 managers of U.S. institutional tax-exempt assets grew 15.6%.
Managers' mezzanine assets grew 7% to $4.89 billion. The top 10 mezzanine managers accounted for 87% of the assets, losing some ground from last year's survey when they had 94.5% of the assets.
Real estate investment trust managers' total worldwide assets were up 9.4% to $394.6 billion, while REIT securities managed for U.S. institutional tax exempt clients increased 19.8% to $113.9 billion in the 12 months ended June 30.
This year's survey for the first time asked about assets managed for defined contribution plans. Managers of REITs ran $15.1 billion for defined contribution plans, accounting for 13.2% of REIT managers' total assets managed for U.S. tax-exempt clients.
Six of the top 10 REIT managers run REIT assets in defined contribution plans — BlackRock Inc., Vanguard Group Inc., Invesco Real Estate, Morgan Stanley Real Estate Securities, State Street Global Advisors and EII Capital Management Inc.
Five managers run a total of $14.3 billion in U.S. tax-exempt real estate assets for defined contribution plans, of which $2.5 billion is in real estate equity. Those managers are Prudential Financial, J.P. Morgan Asset Management, Principal Real Estate Investors, Timberland Investment Resources and UBS Global Real Estate.
During the year ended June 30, the NCREIF Property index return was 11.2%. The total return of the FTSE NAREIT All REITs index, which includes both equity and mortgage REITs, was up 13.02%, while the total return of the FTSE NAREIT All Equity REITs index, which excludes mortgages, was up 13.71%, according to data provided by the Washington-based National Association of Real Estate Investment Trusts.
Not included in the rankings again this year is Blackstone Group LP, New York, which tracks its data in a different way. Blackstone Group executives nevertheless did provide some data. As of June 30, Blackstone Real Estate's worldwide AUM— defined as equity value net of leverage and unused capital commitments — totaled $80.4 billion, of which firm executives estimate one-third is managed for U.S. tax-exempt investors.
(Blackstone's tax-exempt estimate was calculated by multiplying the total real estate assets under management by a ratio of total capital raised in the U.S. from tax-exempt investors for active funds, divided by total real estate capital raised.)