Despite that increased competition, cap rates do not seem to be compressing, likely due to the expectation of disposition volume over the next 24 months. In short, there’s likely to be more than enough property to go around, and Behringer Harvard is bullish on the firm’s opportunity to fully deploy its Multifamily REIT capital into the Class A apartment space. “There are additional bidders that are focused on the same core product we are,” Alfieri says. “But we’ve won more than we’ve lost. Our 2009 reputation is the way we have closed and repeat business with institutional sellers. With the amount of product coming online this year, and the excess capital we have to invest, there’s plenty of opportunity continuing to come our way.” Looks like 2010 just might be another banner year for the firm.
Going Dutch
Behringer Harvard is on the leading edge of a growing trend to partner with foreign investors and seek co-investment equity.
Of the $400 million that has been available as part of Behringer Harvard’s Multifamily REIT I, about half has come via co-investment commitments from the Dutch pension fund PGGM, currently the second-largest pension fund in the Netherlands and 17th largest in the world, according to the 2009 Pension & Investments/Watson Wyatt World 300 ranking of global funds. And Behringer Harvard dealmakers aren’t letting the money sit idle. “A significant portion of our capital investment is coming from institutional co-investment,” says company senior vice president Mark Alfieri. “To date our institutional investors have co-invested in about 70 percent of our portfolio assets on the multifamily side.”
Supplementing the REIT’s common share proceeds with institutional co-investment capital has figured large into Behringer Harvard’s current acquisition spree, including the recent 75-plus percent majority interest purchase of Bailey’s Crossing and 55 Hundred, two Washington, D.C., luxury apartment communities in the final stages of development.
“Our relationship with PGGM is an example of our broader view of how to bring capital into the space,” says Behringer Harvard president and COO Bob Aisner. Industry pundits agree: “Behringer Harvard is among the few in the multifamily space that have substantial assets and capital relationships outside the United States,” says Washington, D.C.-based National Multi Housing Council president Doug Bibby, who also points to Seattle-based Pinnacle, an American Management Services Co., and Englewood, Colo.-based Archstone as firms with foreign investment capabilities. “They are all on the leading edge of what will be a phenomenon in our business—an understanding of the worldwide capital markets, how to attract capital to this country, and how to invest outside the States.”
To that end, Behringer Harvard also maintains a permanent office in Hamburg, Germany and has been successful in attracting individual investor interest from Europe to its real estate funds in addition to leveraging international pension equity.
“The office there is charged not only with managing some of the assets we have in Europe but also with raising capital, some of which could find its way here as a direct investment or as a co-investment in our multifamily platform or one of our other platoforms,” says Behringer Harvard executive vice president and COO Robert Chapman. “Our capital-raising platform is more global and diverse than just the retail individual investor in the U.S., and we think there are a lot of synergies that can be created by marrying capital sources over time.”
