Nuveen courts global investors as US multifamily fund reaches $840m

Nuveen Real Estate is close to raising $1bn (€908m) for its new US multifamily fund and expects to reach $2bn within two years, according to one of its managing directors.

Six months after Nuveen announced it had secured an initial $550m for the US Cities Multifamily Fund, James Martha, head of housing sector for the Americas, told IPE Real Assets that it had increased this to $840m.

“Soon, we will be at $1bn in gross asset value,” he said. “We expect in a year or two to be at $2bn, and within three to five years we would be in the $3bn-$5bn range.”

The intention was, he said, for the fund to be included in the NFI-ODCE, an index that tracks large, open-ended core real estate funds in the US.

Martha was in Australia to address the Australian Superannuation Investment Conference, organised by the Australian Institute of Superannuation Trustees.

Asked if foreign capital was integral to Nuveen’s capital-raising ambitions for the fund, he said: “I absolutely believe this is a global product and that there is global demand, particularly for multifamily in the US.”

He said larger US pension plans had long invested in the sector, which was currently ranked second behind office in their allocations. “For most part, our clients tend to be overweight multifamily and logistics,” he said.

High-net-worth individuals and corporate pension funds were also investing in multifamily, he said.

“Then we look at offshore [investors],” he said. “They don’t have any multifamily exposure, so I think that will change. Our sector fund will be an opportunity to get exposure to US multifamily.”

Initial commitments had come from US investors, but, over the next three to six months, incremental capital was expected to come from Europe, Australia and the Middle East.

“We did bring in a European investor, and Middle East capital is also looking at it,” he said.

“We have talked to a number of investors and consultants in Australia about the fund, and there seems to be significant interest.”

An Australian consultant is carrying out due diligence on the fund on behalf of an investor, he said.

Martha said that US multifamily transactions totalled $175bn last year, exceeding activity in the office sector and almost as large as retail and logistics deals combined.

“Multifamily has been the driver of transactions, and 2018 was not an anomaly by any means,” he said.

Nuveen itself was responsible for $3bn of transactions last year.

At a time of uncertainty for retail property and questions about the ongoing strength of the office market, Martha said the value of multifamily was its defensiveness.

“The multifamily sector has the highest occupancy of all four major sectors, with an average of over 93% in the last 20 years,” he said.

“So if you think we are getting into a lower and slower growth environment, the sector has highly-occupied properties that don’t have exposure to large lease flow-over and low capital investment. That seems like a very defensive strategy to put into a portfolio.”

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