TIAA Unit Closes $1.2B Super-Regional Mall Fund

By Scott Baltic, Contributing Editor

Ala Moana Center, Honolulu

New York—After raising $1.25 billion from investors, TIAA Global Asset Management has successfully closed its T-C U.S. Super Regional Mall Fund LP, TIAA announced Monday. The U.S. SRM Fund reportedly has capital commitments from several domestic and foreign institutional investors and from TIAA’s General Account.

With leverage, these equity commitments will allow the fund to assemble a portfolio of approximately $2.5 billion. To date, the fund has invested roughly $685 million.

One of the investments so far was the purchase in April 2015 of a 12.5 percent stake in Honolulu’s Ala Moana Center, a TIAA spokesperson told Commercial Property Executive. With more than 280 tenants, the mall reportedly is one of the world’s largest and most-productive shopping centers, with more than $1,350 in sales per square foot.

The U.S. SRM Fund is intended to “provide investors with access to dominant super-regional malls via ventures with top tier operators,” according to TIAA, which touts its extensive experience in the retail sector and its position as one of the United States’ leading retail investors. TIAA has a $15 billion, 64 million-square-foot equity and debt portfolio comprising malls, grocery-anchored centers and urban retail.

“Super-regional malls have proven to be a distinctly strong and stable performer throughout multiple cycles,” Suzan Amato, managing director at TIAA Global Asset Management, said in a prepared statement. “They have demonstrated high NOI growth, low volatility compared to other property sectors, and a history of out-performing the NCREIF Property Index.”

(TIAA cites real estate investment performance data from NCREIF showing that super-regional malls have delivered stronger risk-adjusted returns than the office, industrial and multi-family sectors over the last 30 years.)

“Several attractive purchase opportunities have come to our attention through our long-standing relationships with mall operators,” Amato told CPE. “We have a robust pipeline of purchase opportunities with operators who seek capital to fund programs that keep their best product on the leading edge. Our long experience in this sector puts us in touch with these opportunities.”

“We believe that U.S. super-regional malls present a sound long-term investment given the current lack of mall construction and the shift towards consumers seeking entertainment experiences outside the home,” Scott Kempton, managing director & the fund’s portfolio manager, said in the announcement. “These assets are unique, hands-on environments, often offering extensive food hall and fine dining options, as well as movie theatres and other attractions that can ultimately help drive traffic and sales.”

In October 2011, the then TIAA-CREF closed a super-regional mall joint venture owned 51 percent by TIAA-CREF and 49 percent by Dutch pension fund manager APG. The joint venture partners purchased Oak Park Mall in Overland Park, Kan.; West County Center in metro St. Louis; CoolSprings Galleria in Franklin (metro Nashville), Tenn.; Pearland Town Center in metro Houston; and Westfield Montgomery in Bethesda, Md. The five properties totaled roughly 5.8 million square feet and approximately $1.5 billion in value.

Image courtesy of Visit Overland Park