Institutions Diversify into Office, Industrial

LOS ANGELES—Institutional multifamily investors are beginning to diversify into the office and industrial sectors. In an earlier story, GlobeSt.com reported that Institutional Property Advisors, a Marcus & Millichap division, have expanded their multifamily platform into the office and industrial sectors. According to Alan Pontius, the national director of the new division, the firm's clients are expanding into the office and industrial sectors, which have recently improved, to diversify their portfolios.  

"This is not all market related. This is us being responsive to our client base and being able to help our client base, especially the private investor with sizeable amounts of real estate equity, that are looking at ways to diversify their portfolios," Pontius tells GlobeSt.com. "We are trying to address the needs of both the private client world and the needs of the institutional and major client world from an acquisition and disposition standpoint. Certainly, the office market has rebounded well over the last year to year-and-a-half, and the industrial market is arguably as hot as any sector in the marketplace. We always did intend to progressively expand the IPA division throughout the major product types."

That isn't to say that there is money flowing out of multifamily into office and industrial, especially here in Los Angels, where multifamily is still a strong investment class. "We are not seeing a trend of multifamily dollars being redirected into office, but you are certainly seeing transactional examples of that. A certain percentage of properties that we handle are with investors that have acquired the product type for the first time within their portfolio," adds Pontius. "This is just a component of an active transactional environment, and within that activity, there are certainly occasions where an investors is exchanging out of one product type into another or occasion where an investor that has owned one or two asset classes is expanding into others."

Pontius doesn't have any specific goals in terms of volume that he plans to hit other than "being productive in the space." He says that the expansion is about recognizing the changing needs of institutional clients, and serving those needs. "For an institutional client, it is very different to sell a property in Century City than in the San Fernando Valley," he says. "That doesn't mean those assets don't have liquidity or don't have trade value, but the institutional interest is in a more narrow band of identified properties that the broader private interest. For an institutional seller, we can bring a deeper population of investors. To us, the real value add of the IPA platform is the broad-based connectivity of institutional positions all the way through the variety of forms of private capital. It is that merger where we will bring what we expect to be a unique perspective of investor reach and overall liquidity across the asset class spectrum as opposed to a narrower spectrum that would fit every element of institutional criteria."

The firm is planning to expand its team in the Los Angeles market and hire brokers with an office and industrial background to augment the already seasoned team.