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Investor Pursues New Strategy in U.S. Market

As the competition to acquire real estate assets intensifies, a former foreign-backed U.S. investment and management company has partnered with a domestic ally to fund $850 million in acquisitions of commercial real estate at home.

Jamestown, a real estate investor and manager previously funded by German investors, and Griffin Realty Advisors, L.P., have formed a joint venture to broaden its resources among U.S. investors. The deal between the two Atlanta-based firms represents the first time in Jamestown's 25-year history that it will rely on money from stateside investors. Jamestown has purchased more than $8 billion in U.S. real estate including One Times Square and Chelsea Market in New York; in San Francisco, Union Square and Pacific Place and One Federal Street in Boston.

"The alliance with Griffin Realty Advisors broadens Jamestown' s capital base with U.S. investors," Jamestown managing director Matt Bronfman, said in a statement. "And, it creates a partnership with a well-respected team of experienced institutional fund managers."

The partnership plans to raise approximately $300 million by the fall of 2008, leveraging up to 65 percent, to reach its' targeted goal of $850 million within two years. As much as 70 percent of the portfolio will consist of office buildings and hotels, between 10 percent and 15 percent will be grocery-anchored shopping centers. The remaining 15 percent will be earmarked for multi-family residences.

The joint venture's strategy targets value-added opportunities that offer a lower rate of return because they are less risky than more opportunistic acquisitions. Its investments are expected to generate returns in the low-to-mid-teens, according to a spokesman for Griffin. Investors typically seek returns of approximately 8.1 percent for neighborhood and community shopping centers, with rental growth averaging 2.9 percent, according to the Spring 2007 RERC Real Estate Report from the Real Estate Research Corp. Returns for all property types average 8.4 percent.

Neighborhood and community shopping centers were given a higher investment rating than other types of retail property, with 10-year returns averaging 14.57 percent vs. 13.57 percent for regional malls and 13.52 percent for power centers.

Griffin and Jamestown are reported by The Jacksonville Business Journal to be under contract for a mixed-use coastal resort in Texas and considering several hospitality properties in the Southeast and the Midwest. Meanwhile, Jamestown is simultaneously working on its Jamestown Co-Invest IV fund, which is funded by German investors and expected to spend more than $600 million on acquisitions of redevelopment opportunities in Atlanta, Ga., Savannah, Ga. and Charleston, S.C. Griffin is also in the process of working on several property-level partnerships in the U.S., says Ryan, but none of them will target retail.

Overall, this is proving to be a very active year for real estate investors, with several institutional real estate funds breaking record levels. Earlier this summer, Morgan Stanley raised its largest property fund ever, with $8 billion, while Goldman, Sachs & Co. raised more than $4 billion for real estate investments, the Blackstone Group is raising $10 billion and the Credit Suisse Group is raising $2.5 billion.

-- Elaine Misonzhnik

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