By Gail Kalinoski, Contributing Editor
TIAA-CREF has been investing in commercial real estate for more than 60 years and in natural resources and other real assets for more than 20. Now the financial services organization best known as a leader in the retirement services field is creating a new global real assets division to drive expansion and take advantage of the growing interest in alternative investments.
The new division will operate as a standalone unit within TIAA-CREF’s global asset management business and include the firm’s global real estate, agriculture, timber, infrastructure and energy teams. Its subsidiaries—TH Real Estate, Westchester Group Investment Management, GreenWood Resources and Churchill Asset Management—will also be included. TIAA-CREF currently manages about $100 billion in real assets around the world.
“Institutional investors worldwide are increasingly turning to real assets as part of a broader focus on alternative investments, which can provide a source of uncorrelated returns,” Rob Leary, CEO, Asset Management, said in a prepared statement. “TIAA-CREF has a long history of finding innovative investment opportunities across this asset class, and the launch of our Real Assets business will enable us to enhance our capabilities and diversify investment options for our clients and investors.”
Jose Minaya will serve as president of the new unit. He has been head of Private Markets Asset Management, where he built out real asset teams. Heather Davis, CIO of TIAA-CREF’s Private Markets Group who has more than 30 years of investing experience in real estate, infrastructure, private equity and credit, will be CIO of the Real Assets unit. John MacCarthy¸who has been Nuveen Investments’ Chief Legal Officer for 10 years, will become the new unit’s COO. Both David and MacCarthy will report to Minaya.
Tom Garbutt, the head of TIAA-CREF’s global real estate business, will retire this year but plans to remain as an advisor during the transition period. Phil McAndrews, CIO for global real estate, will also be leaving the company after a transition period.
“This model will allow us to more effectively develop all aspects of our real assets business so we can best leverage our distinct expertise in this space and better serve our investors, which have grown beyond our retirement base to include sovereign wealth fund, pension fund and insurance company clients,” Minaya stated. “These changes will enable us to take a more nimble approach for our business and accelerate our speed-to-market with transactions and products.”
Minaya described the decision as “a reflection of our determination that clients would be best served by bringing all of our real assets capabilities together in a way that allows us to better align our businesses under common business goals and a top-line investment strategy.”
Asked where he anticipated the most growth for the new business unit, Minaya told CPE he expected it across all the real assets businesses.
“In real estate, for example, we have a multifamily franchise in the U.S. that we can reproduce in the U.K. and continental Europe, where the sector is still in the early stages of adoption. Ag and timber investing is still in its nascent stage as an institutional investment and holds great potential in terms of being a hedge against inflation in a growing economy. In infrastructure and energy, we think the biggest areas of opportunity are in transportation, midstream and renewable power,” he said. “These subsectors require a variety of long-term investment strategies to finance their capital expenditure and growth needs and our long-term approach fits nicely with the typical asset life of these investments.”
The combined platform will comprise about 900 employees across 31 offices in 16 countries and include Randall Pope, president of Westchester Group; Jeff Nuss, president of Greenwood Resources; Ken Kencel, president of Churchill Asset Management; Chris McGibbon, head of real estate for the Americas; and Mike Sales, head of TH Real Estate, which focuses on European and Asia Pacific real estate.
When TIAA-CREF announced last April its acquisition of the remaining 40 percent interest in TIAA Henderson Real Estate from its joint venture partner for $122.7 million and renaming it TH Real Estate, Leary said then that having full ownership was “an exciting step in our long-term plan to expand our asset management business.”
Also last year, TIAA-CREF paid $667 million for the Global Timber Resources investment partnership in June and $3 billion in August for an investment partnership in Global Agriculture II.
TIAA-CREF said it is committed to growing the real assets division through a multi-affiliate model where the affiliates will retain their distinctive investment processes and cultures.