TCW puts money on real estate
Los Angeles-based money management giant TCW Group Inc. is making a move into commercial real estate investing, a decade after folding up its first such venture.
TCW, parent of Trust Co. of the West, is expected to announce today that it’s buying a majority stake in Buchanan Street Partners, a Newport Beach-based real estate investment banker and portfolio manager.
TCW, which manages $150 billion in bond and stock assets for clients, said it was adding commercial real estate to its menu of investment options because of continuing interest in the property market from pension funds and other big-money investors.
Despite some analysts’ concerns that commercial real estate could follow the residential market into a slump, many institutional investors remain hungry for office buildings, warehouses and other properties as a way to diversify their portfolios for the long run, said Robert Beyer, chief executive of TCW.
“Long-term investors don’t think the same as the commentators on CNBC,” Beyer said, referring to short-term forecasts of markets’ twists and turns.
Buchanan Street, which was founded in 1999 and has 60 professionals, arranges financing for real estate deals and invests in commercial property on behalf of clients. Its portfolio of managed properties is worth about $2.5 billion and comprises office, industrial, retail and apartment buildings mostly on the West Coast, said Robert Brunswick, the firm’s chief executive.
TCW had been hunting for a real estate partner for more than a year, Beyer said.
Buchanan Street began looking for a bigger partner in December, in part because the firm wanted to tap burgeoning foreign investment funds and property opportunities, Brunswick said.
“We wanted somebody who could give us a road map to the international market,” he said.
TCW, a subsidiary of French banking titan Societe Generale Group, has attracted tens of billions of dollars from foreign investors in the last decade, Beyer said.
Neither TCW nor Buchanan would disclose the price tag on TCW’s investment in the firm. Beyer said the deal allowed Buchanan’s principals to hold on to a “significant” stake in the business.
TCW had operated a joint venture real estate investment firm, TCW Realty, in the 1980s and early 1990s. That venture, with Westmark Realty, ended after Westmark agreed to be bought by CB Commercial Real Estate Group Inc. in 1995.
TCW Realty’s investment returns were hurt by the office-property glut of the late ‘80s and early ‘90s, Beyer said. “Investors in that cycle didn’t hit their investment return objectives, and we didn’t either,” he said.
Brunswick said there were good reasons to believe the commercial real estate market’s current healthy tone was sustainable.
“You haven’t had a lot of overbuilding in this cycle like you had in others,” he said.
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