The largest real estate managers fared a bit better during the survey period. The 50-largest real estate managers of U.S. institutional tax-exempt assets under management grew at a faster clip than the entire group, up 10.7% to $480.3 billion, representing 93% of the total. U.S. institutional tax-exempt AUM of the top 10 managers grew 11.5% to $291 billion, with the top 10 managers accounting for 56.5% of total U.S. institutional tax-exempt assets.
PGIM, the asset management arm of Prudential Financial Inc. formerly called Prudential Investment Management, once again leads P&I's rankings as the largest manager of worldwide institutional real estate assets with $101.4 billion, up 3% from last year. MetLife Investment held its second position, gaining 12% to $101.1 billion. TH Real Estate, the real estate division of TIAA Global Asset Management, was third with worldwide assets of $94.4 billion, also up 12%.
Not included in the rankings again this year is Blackstone Group LP, New York, which tracks its data in a different way from P&I's method. But Blackstone executives did provide some information. As of June 30, Blackstone real estate's worldwide AUM — defined as equity value net of leverage and unused capital commitments — totaled $103 billion. One third of the capital is from U.S. institutional investors.
TH Real Estate retained the top spot on the ranking of U.S. institutional tax-exempt assets with $64.8 billion, up 15%. PGIM was second, up 4% to $50.4 billion, and J.P. Morgan Asset Management was again in the third spot with U.S. institutional tax-exempt assets with $45 billion.
Jack Gay, Charlotte, N.C.-based managing director and global head of commercial real estate debt at TH Real Estate, attributed his firm's increase to continued low interest rates, which drove investors' search for additional yield. “It's been a long real estate cycle,” Mr. Gay said. “The real estate cycle is certainly aging and so investors are conscious about where values are.”
On the equity side, PGIM continued the trend it began last year — selling as many properties as it has been buying, noted Eric Adler, CEO of PGIM Real Estate. “Last year was balanced between net buying and net selling. It's the same this year,” Mr. Adler said. “It's interesting the amount of money wanting to go after large stabilized core assets.”
There have been a number of core deals, especially in the U.S., he said. However, he added that transaction activity in the U.K. stalled after British citizens voted to leave the European Union in June. “Money was waiting for the Brexit vote, which they thought would go the other way. Brexit threw everyone for a loop,” Mr. Adler said.
Before the June 23 vote, Asian investors investing outside Asia had divided their investment between the U.S. and Europe. Following the vote, Asian investors are going with the U.S. “Even with the economic and political uncertainty in the U.S., the U.S. feels better for Asian investors than Europe,” Mr. Adler explained.
Joseph K. Azelby, managing director and CEO, global real assets, in the New York office of J.P. Morgan Asset Management attributed his firm's growth to investor flows and performance.
While inflows and outflows were fairly close, some of JPMAM's larger clients reduced their positions in J.P. Morgan Asset Management's large open-end core commingled funds as a rebalancing move, he said.
J.P. Morgan tops this year's ranking of the 10 largest managers of open-end funds for U.S. institutional tax-exempt investors, with assets up 8% to $35.9 billion. UBS Global Real Estate was in the second spot with open-end fund assets up 5.4% to $23.8 billion and TH Real Estate was in third with $20.2 billion. TH Real Estate did not report open-end fund assets last year.
“The growth was due to a combination of inflows and appreciation as well,” Mr. Azelby explained. “We saw everything from the traditional pension funds still adding to their core real estate allocations and we still see investors that are relatively new to the real estate space coming into our real estate funds.”
JPMAM has also had some success with very targeted real estate strategies the firm offers to larger, more sophisticated investors, he added.