By Joshua Burd
Commercial real estate in New Jersey remains a major draw for institutional investors, from regional banks to life insurance companies to the global private equity giant Blackstone.
Executives from each of those institutions said as much on Tuesday during a conference hosted by the Rutgers Business School, offering a look at their investment strategy in both the Garden State and beyond. That strategy is changing and ever mindful of market forces and questions — such as supply and demand, uncertainty over interest rates and when the current recovery will end — but continues to be dependent on both location and asset class.
“There’s a lot of differentiation happening across different sectors and geographies,” said Kenneth Caplan, senior managing director and global chief investment officer for real estate at Blackstone. “And that’s really where we’re identifying opportunities for investments.”
Caplan was one of two keynote speakers at the conference, which drew some 200 real estate executives, professionals and students to the Short Hills Hilton. Julia Coronado, president and founder of Macro Policy Perspectives, delivered the first presentation and outlined the changing global economic conditions, giving way to a Q&A with Caplan and two panel discussions.
It was the latest event hosted by the Center for Real Estate at Rutgers Business School, which is only about three years old but has attracted broad support from some of the state’s top players in real estate. The program launched in 2014 after a $1.5 million donation from Paul V. Profeta, president and owner of West Orange-based Paul V. Proteta and Associates Inc.
It has grown from that endowment and now has a 10-member executive board, an advisory board of about 80 members and a faculty of nine, which teaches six courses at both the Newark and New Brunswick campuses. The center was just awarded the classification of “major” in the MBA program.
As he discussed Blackstone’s global real estate platform, which manages more than $100 billion in assets, Caplan outlined a strategy that boils down to fundamentals. But he said his company takes advantage of its vast footprint and the data its portfolio generates in order to make more sophisticated decisions.
“We identify certain themes or certain areas where we see better opportunity,” said Caplan, a New Jersey native and Short Hills resident. “We invest in scale and I would say, if anything, that scale has further and further differentiated our business.”
He said his home state reflects many of the trends that are driving decisions in other markets, including urbanization and the impact of e-commerce on logistics space. For instance, when it comes to the industrial sector, several New Jersey properties were included in the 117 million-square-foot portfolio that Blackstone sold in 2015 for some $8.1 billion.
Caplan also pointed to the well-documented struggles of the suburban office and retail sectors, but he and other speakers said those struggles come with opportunities.
“In the last six months we’ve actually seen some relatively good opportunities in the retail space,” said Mark Wilsmann, managing director and head of real estate equity strategies for MetLife. “And it’s because so many people, I think, have been reading the Wall Street Journal articles that have been negative on retail. And I think our view is that retail really runs the gamut from some of the very risky stuff to some of the most solid investments you can get involved with.
“It’s trending toward those infill locations and necessity retail or experiential retail, and we’ve seen prices drop and yields improve in those types of opportunities.”
Wilsmann participated in the first of two panels, speaking alongside Todd Everett, senior managing director with Principal Real Estate, and Kevin Smith, managing director and head of Americas for PGIM Real Estate. A second panel featured executives from four banks that are headquartered in New Jersey or have a strong presence here, offering a look at the strategy of institutions that are more local or regional.
The banking executives said they heeded the same market conditions as their counterparts at the private equity and the life insurance level, but noted that their approach is more nuanced because of their scale and their presence within the community. Kevin Cummings, CEO and president of Investors Bancorp., said diversification is important, especially when it comes to “the asset classes and the types of lending that you’re doing.”
To be sure, the Short Hills-based bank has grown exponentially in recent years in part because of its success in multifamily lending, but the company has made sure to mix in more traditional commercial deals recently.
“It gets down to being good relationship bankers, knowing your customers and then managing the risk with what you have in the portfolio,” Cummings said.
As such, he was echoing the sentiments of Chris Martin of Provident Bank, who spoke of the importance of segmentation.
“We look at exposure limits on any little area — whether it be hospitality, retail, industrial, multifamily, office,” said Martin, chairman, CEO and president of the Jersey City-based bank. “It’s relationship-oriented. We’ll do an office building if they’re going to repurpose it and they’ve got clients in there already that want that, we’re there. Other than that, we’re not going to touch it.”
(Editor’s note: Paul V. Profeta is the owner and publisher of Real Estate NJ.)
