AEW Capital Management worked on behalf of a Lucent Technologies pension fund to buy 14 Aegean Drive in Methuen earlier this year. The 234,000-square-foot industrial property was purchased for $18.7 million.
The buying spree is well underway by AEW Capital Management for its fifth real estate opportunity fund, but the Boston-based advisory firm reached a significant milestone last week following the closing of the massive investment vehicle, which now has a total equity capitalization of $686 million.
According to a release issued by the firm trumpeting the closing, AEW Partners V is aiming to recapitalize distressed and under-managed assets, take advantage of pending loan maturities and defaults, invest “in the path of continued globalization” and pursue capital-constrained sectors and special investment opportunities. The geographic focus will primarily be North America, company officials added.
“We are very optimistic about the investment opportunities we see in today’s market as we continue partnering with operators,” said AEW Chief Executive Officer Jeff Furber in announcing the fund’s closing. AEW Partners V will pursue new investment avenues, Furber said, but the sponsor will also rely on relationships established in past investment ventures to identify potential deals.
“The AEW partners funds have a 17-year track record of successfully investing across market cycles, harvesting gains and returning capital to our investors,” AEW Portfolio Manager Marc Davidson said in the release. Davidson also said that about one-third of the latest fund had already been committed at the time of the closing. Off-market transactions are among AEW’s targets in the fund, the manager said, with the firm also attempting to identify evolving demographic trends that would allow forward-thinking purchases to further enhance the portfolio.
As Davidson indicated, the real estate investment management firm has hit the ground running in seeking deals to populate its fifth fund. Last month, for example, AEW entered into a joint-venture agreement with a Seattle hotel owner/investor for the purchase of the Chicago Marriott Suites Deerfield, a 248-room hotel located in an Illinois office park. As part of AEW’s value-added approach in Fund V, the hotel will undergo a multimillion-dollar renovation to bring the facility up “to top physical condition,” according to the partnership.
The Chicago deal was the second purchase made between Fund V and the Seattle firm, Dow Hotel Co., with the same partnership acquiring the 272-room Hilton Atlanta Northeast hotel a few months earlier for $20 million.
In another transaction consummated last month, the AEW fund teamed up with Colliers ABR to acquire a 22-story office tower in midtown Manhattan for $100 million. The purchase of 119 West 40th St. includes additional development rights at 120 West 41st St., although it is unclear how actively that element will be pursued by the new ownership.
25 Years in Business
A variety of capital sources beyond Fund V has been used to complete the various deals made thus far in 2006, with AEW working on behalf of a Lucent Technologies pension fund to purchase 14 Aegean Drive in Methuen earlier this year. Developed by Atlantic Tambone, the 234,000-square-foot industrial property was purchased for $18.7 million. AEW also recently purchased a 252,000-square-foot industrial/warehouse facility in Scranton, Penn.
Headquartered in Boston’s Seaport District, AEW Capital Management is marking its 25th year providing investment management services to investors on a global scale. The group and its various affiliates manage more than $32 billion worth of real estate assets and securities, including portfolios in both the private and public markets and for various levels of the risk/return spectrum.
As with other investment advisory firms, AEW has been especially active throughout the United States during the past two years, with investors flocking to commercial real estate given steady returns and a lack of alternatives in the wake of the stock market’s prolonged difficulties. Last year alone, AEW completed 48 transactions totaling approximately $1.8 billion in gross asset value.
Thus far, it appears AEW is striving to match the activity level of 2005, with several sizeable deals already completed as the second quarter commences. Among the firm’s recent acquisitions were two shopping plazas in Georgia, one a 156,000-square-foot asset in Fayetteville and the other a 208,000-square-foot mall in Augusta. Retail has not been the sole focus, however, with other deals including a 218,000-square-foot office property in Phoenix, a 376-unit apartment complex in Pennsylvania and a 460-room, full-service hotel in Long Beach, Calif.
