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While some property owners seek to unload assets to give their balance sheets a boost, USAA Real Estate Co. is still in hot pursuit of acquisitions and new developments. So far this year, the San Antonio-based company has snapped up seven million sf to feed its latest investment ventures, and has two million sf of build-to-suits in the pipeline.
"We are so well-capitalized that our cash flow will be there regardless of the cycle," explains company president and CEO Edward B. Kelley. And at the end of the day, that's what keeps business flowing.
"Every deal comes down to a financial game," agrees Dirk Mosis, VP of real estate investments. "Dollars and cents make it work. Whether it's a pretty building or a great piece of land, they all need money and that's where we come in."
Indeed, this 20-year-old developer, owner and property manager has never really been plagued by capital concerns, say the executives. It taps into the vast resources of its parent company, USAA, an insurance and financial services giant boasting more than $64 billion in assets owned or under management.
Formed in 1922 to offer army officers auto insurance, USAA has grown to provide different insurance products for members of all armed forces and their families (4.8 million members), earning an extremely strong rating (AAA) from Standard & Poor's and an exceptional rating (Aaa) from Moody's Investor's Service. For its real estate endeavors, there are two operating tiers comprising roughly 180 employees: USAA Real Estate Co., known also as RealCo; and its 10-year-old subsidiary, USAA Realty Co., which handles property management and leasing for more than 25 million sf of USAA space and third-party assets nationwide.
RealCo's function is to invest a portion of the insurance company's reserves in real estate equities, explains Kelley. This is done primarily through its build-to-suit, co-investment and acquisition programs. RealCo does between $200 million and $500 million each year in acquisition deals. For $100 million-plus purchases, RealCo. usually takes on an institutional partner.
To date, the firm has amassed roughly 83 billion in owned and managed assets. The 31-million-sf total breaks down into 11.7 million sf of industrial, 18.9 million sf of office space and some 385,000 sf of retail. In addition, it has...