Preqin's Real Estate Online currently tracks over 261 institutional investors based in the state of New York. The densely populated state is home to New York City, a world leading financial centre and the most populous city in the United States. The preferences of New York-based institutions when investing in real estate reflect those of US-based investors as a whole. New York-based investors typically have an appetite for higher-risk strategies, with value added and opportunistic strategies pursued by 63% and 60% of investors respectively; comparatively, across the entire US, the figures are 62% and 55% respectively. Debt and distressed real estate are favoured by 37% and 31% of New York-based investors respectively, compared to 36% and 28% of all other US-based investors.
However, the story is different for the least preferred strategy of all US-based investors: core real estate vehicles are favoured by only 19% of New York-based investors, significantly lower than all other US-based investors (35%). This lack of congruence may be explained by the composition of investors in the state of New York; foundations account for 29% of New York-based investors, and typically have a greater appetite for higher-risk vehicles, as examined in a previous blog, Foundations Investing in Real Estate. Furthermore, public pension funds are known to express a preference for open-ended core funds, and these make up only 5% of New York-based investors, compared to 21% of all other US-based institutions.
The above chart illustrates the distribution of New York-based investors’ current and target allocations to real estate. Sixty percent of investors have a current allocation below 5% to the asset class, although the majority (86%) maintain a target allocation of 5% and above. This would appear to indicate that on average, New York-based investors are under-allocating to the asset class. The average target allocation across New York-based investors is $877mn, with an average actual allocation of $613mn. For US-based investors as a whole, the average target allocation is $560mn, above an actual allocation of $395mn.