Nareit has identified a growing trend among REITs — the use of joint ventures in “deals that are growing in frequency and size.” The drivers of what was long an alternative but relatively minor strategy in the space are tighter capital markets, market volatility, and REITs that want to buttress balance sheets and expand their geographic reach.
The trend started a few years ago. “We’ve seen JV formations across a variety of property types ranging from multifamily and self-storage on one end of the spectrum to office to data centers and large industrial properties on the other end, particularly when an asset is being developed or re-developed,” Daniel LeBey, partner at law firm Vinson & Elkins, told Nareit.
An example was the $83 million acquisition of Proscenium, a 526,000 square foot Class A office building in Atlanta by a joint venture between Cousins Properties and Town Lane. The latter owned 80% of the JV, with Cousins taking the remaining 20%. Cousins was to provide property management and leasing services.
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“It’s not common that you would see a REIT be a minority [owner in a] JV, but no surprise office REITS have had their stock prices pummeled,” John Nicolini, managing director and senior consultant at investment management consultancy Verus Investments, told GlobeSt.com. “It’s a way for them to get good opportunities without having to raise a whole lot of capital.” The other investor gets a partner with experience in major sector-specific projects that are often strong operators.
“Groups like Cousins or SL Green want to be a buyer today,” Nicolini adds. The right joint venture gives them access to investment capital, currently simplifying the process of raising money. “These REITs are operators. Sponsors can say, ‘I have capital. I don’t have operating capabilities.”
As Nareit noted, REITs historically took a majority stake of at least 51%. Now, it’s more common for REITs to take equity between 20% and 35%, often while remaining the general partner.
Blackstone and Digital Reality established a $7 billion data center joint venture in late 2023 to develop four hyperscale operations in three metro areas across two continents. Blackstone provided $700 million of initial capital contributions for an 80% share; Digital Reality kept 20% and was to manage development and day-to-day operations.
Last month, Digital Reality entered a 50-50 JV with Bersama Digital Infrastructure Asia to develop and operate data centers across Indonesia, giving Digital Reality an entry to the country.
Equinix, which provides digital infrastructure, announced a joint venture with Singapore's sovereign wealth fund, GIC, and CPP Investments in October 2024. GIC and CPP each took 37.5% of the JV; Equinix had the remaining 25%.
“Take Global Medical REIT, for instance, which recently partnered with Heitman while retaining just a 12.5% stake but full management control,” Andrew Latham, a certified financial planner at SuperMoney.com, told GlobeSt.com. "Compared to historical norms where REITs often matched partners dollar for dollar, today’s strategy prioritizes control and operational influence over upfront investment. This asset-light, capital-efficient model allows REITs to scale more aggressively and stay nimble, especially in today’s tight capital markets. The trade-off? While this boosts growth potential and preserves balance sheets, it can also mean more complex risk-sharing dynamics and potentially thinner slices of long-term returns.”
It's not always an easy deal for the investors. “REITs prefer to invest in passive assets that do not require a high level of tenant services,” said Mitchell Snow, a REIT expert and tax chair at real estate law firm Adler & Stachenfeld. “REITs can provide those services, though they have to jump through additional hoops for this. I have seen inexperienced JV partners struggle with these REIT requirements.”
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