- Feb 06, 2012
By Keat Foong, Executive Editor
Behringer Harvard’s multifamily strategy in 2009 and 2010 turned out to be timely. While other developers may have been capital constrained or sitting on the sidelines, this commercial real estate company was one of the most active buyers of multifamily real estate in those two years.
“The fact was that there were very high quality properties on the market at prices that were at significant discounts to replacement cost, often not because of weak supporting fundamentals but challenges the owners had at the time,” says Jason Mattox, executive vice president and COO of Behringer Harvard Holdings LLC.
What enabled this sponsor of real estate investment trusts, partnerships, joint ventures and proprietary investments to pursue its acquisitions were also strategic investors who placed their confidence in the bold plans during the recession, Mattox suggests. Now that the multifamily market cycle is on the upswing, Behringer Harvard, which marked its 10th anniversary, will probably enjoy the maturation of those performance-leading investments. And it will also continue its commitment to the non-publicly traded real estate alternative investment space, says Mattox. “Trust built with our investors is the foundation for our company. That allows us to be agile and innovative,” he says.
Behringer Harvard has so far raised a total of more than $5 billion in equity from its institutional and individual investors, and invested in more than $11 billion in real estate. The company focuses primarily in office, hospitality, multifamily, industrial/warehouse and mixed-use assets. Behringer Harvard participates in the multifamily sector through the Behringer Harvard Multifamily Reit I, Inc., as well as through the Behringer Opportunity Reit I Inc. and Behringer Harvard Opportunity Reit II Inc. The portfolio of the Behringer Harvard Multifamily Reit I, which completed its offering in September 2011 with $1.65 billion in raised proceeds, includes ownership interests in 42 multifamily communities in 13 states consisting of 11,112 units as of the end of last year.
Behringer Harvard invests in core, value-added and opportunistic real estate, with “clearly defined holding periods and exit strategies.” Focused on major multifamily markets in the sunbelt and coastal areas, the company expects to see more new development starting this year. It just broke ground on the 121-unit Allegro II in the 70-acre mixed-use Addison Circle, Dallas. The project is the second phase of a property Behringer Harvard acquired in 2010. According to Mattox, the company is currently exploring more than 20 multifamily development opportunities, either to be built by itself, or in partnership with other developers.
Behringer Harvard was founded in 2001 by Robert M. Behringer as the successor of two companies, Behringer Partners and Harvard Property Trust Inc. that had sponsored real estate programs since 1989. Today, it has 630 employees. The property management business unit, Behringer Harvard Residential, was launched in 2010, and management of the company’s multifamily portfolio has been transitioning in-house to the unit since then. In just one year, Behringer Harvard Residential added 165 new employees, increasing Behringer Harvard’s number of employees by 34 percent, the company reported in 2011.
Although some of the Behringer Harvard’s commercial real estate investment programs have been negatively impacted by economic conditions in 2011, institutional investors continue to boost, and show great confidence, in the funds. Notably, Behringer Harvard entered into a co-investment partnership with a large pension fund advised by Heitman LLC in 2011. The pension fund obtained a minority interest in 4,100 apartment units. This development follows the move the year before by PGGM Private Real Estate Fund, a Dutch pension fund investment vehicle, to increase its investment in Behringer Harvard’s multifamily portfolio to $300 million. Investors’ perception of Behringer Harvard’s management team is “the launching pad to accomplish what we have in the past 10 years,” says Mattox.