Quality Counts
Jul 1, 2007 12:00 PM, By Jennifer Popovec
Who's Buying?
Institutions, Australians lead acquisition activity.
Institutional investors and Australian buyers represented nearly 60 percent of retail acquisition activity during the first four months of 2007, pushing investment volume to $27.7 billion, according Real Capital Analytics. That volume is more than double the investment activity reported during the same period in 2006.
So far this year, TIAA and Prudential Real Estate Investors are leading the pack on the institutional investor side. Centro Group and Macquarie Bank are the most active Australian buyers.
For their part, Australian buyers have been actively targeting the United States for several years, investing capital from superannuation funds — Australia's state-regulated pension system. With $950 billion under management, these funds are big investors in commercial real estate and have put a lot of that into retail. Overall, they allocate at least 9 percent to real estate.
REITs like Developers Diversified Realty Corp. and Kimco Realty Group accounted for 11 percent of the activity, largely through merger and acquisitions activity and joint venture partnerships. Private buyers represented 22 percent. Private equity funds, so active in other commercial real estate segments, accounted for only 4 percent of the investment activity in the retail sector, choosing instead to focus on acquiring retailers.
The buyer composition in 2007 is radically different from the buyer composition in previous years. In 2006, for example, institutional and foreign investment accounted for 30 percent of acquisitions. The most active investors were private buyers, representing nearly 50 percent of the investment activity.
From 2003 to 2005, REITs and private buyers were the most active investors, according to Real Capital Analytics. In 2003, for example, REITs accounted for 31 percent of the acquisition activity, while private buyers represented 33 percent of the activity. In both 2004 and 2005, REITs accounted for 20 percent or more of the investment volume, while private buyers represented more than 30 percent of the total.
— JP
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