By Jon Peterson
New York City-based Nuveen is planning to invest more capital in San Francisco and Seattle for its target-date mutual fund series, the TIAA-CREF Lifecycle Funds. These markets would be joined by other major markets around the country including New York City, Boston, Philadelphia, Los Angeles and Florida.
Additional capital will be invested in the Lifecycle Funds since the real estate allocation in the fund has been increased from 1 percent to five percent. “As of the end of March, we had reached the 1 percent allocation that the fund has for real estate. This was achieved with us investing $220 million into real estate. To get to the new five percent targeted allocation, we will have the ability to invest $1.3 billion in real estate going forward. It’s likely it will take us at least a couple of years to invest this capital on a nationwide basis,” says John Cunniff, a managing director at TIAA Investments and a portfolio manager of the TIAA-CREF Lifecycle Funds Series.
The TIAA-CREF Lifecycle Funds were first launched in 2004. The total size of the fund now is $26 billion. All of the real estate that will be invested in the fund will be done through TH Real Estate, an investment affiliate of Nuveen.
The investment strategy for the new capital will be to invest in core real estate. This would be buying a combination of existing office, industrial, retail and apartment properties. The return benchmark used for the strategy is the NCREIF-Fund Index Open End Diversified Core Equity. The properties in which the fund invests will typically be at least 90 percent occupied and will be newer in nature. These assets will generate returns primarily from rental income with asset appreciation as a secondary goal.
This core investment strategy is very typical of new institutional coming into the market. According to industry sources, core real estate is where most new sources start out investing in. Once this is secured, capital sources then move on to value-add or opportunistic strategies.