Guardian Life Insurance Co. of America is backing a venture that plans to assemble a $1 billion portfolio of apartments in the Western U.S.
Guardian is taking an equity stake in TruAmerica Multifamily, led by Robert Hart, and will invest alongside other insurers and pension funds in properties selected by the venture, said Robert O’Rourke, who oversees Guardian’s real estate portfolio. The business will target mid-tier properties in need of renovations in cities including Los Angeles, San Diego, Seattle and Denver, he said.
“We’re looking to be in class-B assets that need a little TLC,” O’Rourke said by phone, using an abbreviation for tender loving care. “We can make some capital investments that would improve the cash flows, raise the rents.”
Guardian is betting on older buildings in urban areas and prefers apartments because demand is strong and increasing rents can provide a hedge against inflation, O’Rourke said. American International Group Inc. (AIG:US) is also investing in apartments as more Americans avoid owning property, Chief Executive Officer Robert Benmosche, 69, said in May.
“We do invest in other real estate asset classes, but there’s a tremendous amount of caution, because we’re concerned about locking in to long-term leases,” O’Rourke said. “The opportunity to reset your rates in multifamily every year is a really nice attribute.”
O’Rourke declined to say how much New York-based Guardian is investing in TruAmerica. He said levered internal rates of return are projected to be in the “mid-teens,” and TruAmerica will invest about $300 million to acquire $1 billion in multifamily properties.
Guardian currently has about $2 billion in market value of real estate, and the TruAmerica deal provides the company with a new way to find properties, O’Rourke said. Guardian had about $35 billion in investments as of Dec. 31.
Hart, CEO of Los Angeles-based TruAmerica, led Kennedy-Wilson Holdings Inc. (KW:US)’s multifamily management group from 2000 until June.
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