In a bid to broaden its alternative investments menu, Bank of New York Co. said Tuesday it had agreed to buy Urdang Capital Management Inc., a Plymouth Meeting, Pa., real estate investment management company.
The deal would let Bank of New York offer real estate investments to institutional investors on a broad scale for the first time, said Steven Pisarkiewicz, the head of BNY Asset Management.
Institutional investors have increasingly sought real estate investments in an effort to beat lackluster stock market returns, he said. Through Friday, the National Association of Real Estate Investment Trusts Index had posted a year-to-date return of 4.42%, compared with 3.15% for the Standard & Poor's 500.
"People are looking at alternatives in general," Mr. Pisarkiewicz said. Pension funds, in particular, have turned to real estate investments as an alternative to more traditional asset classes, he said.
The Urdang deal makes sense strategically for Bank of New York in that it gives clients more choices, said Jacqueline Reeves, an analyst with Ryan, Beck & Co. "This allows them to add additional solutions and products to their array," she said.
Bank of New York has looked to bolster its alternative investment offerings since it bought Ivy Asset Management, a funds of hedge funds company that now has more than $14 billion of assets under management, in 2000. The bank bought Lockwood Financial, a Malvern, Pa., managed accounts provider, in 2002 and the clearing firm Pershing in 2003.
BNY Asset Management oversaw $107 billion at Dec. 31.
The bank evaluated several real estate investment management firms for potential acquisition last year before pinpointing Urdang, which manages about $3 billion of realty assets, according to Mr. Pisarkiewicz.
Bank of New York currently offers real estate investments to institutional clients on a limited basis. It occasionally puts clients in individual real estate securities or third-party exchange-traded funds with real estate components, Mr. Pisarkiewicz said.
The Bank of New York deal, which is expected to close this quarter, will give Urdang access to a much broader distribution platform, said Richard Ferst, the Pennsylvania company's president and chief operating officer. "It's a good, strategic complement for us," he said. Urdang had not sought an acquisition partner before being approached by Bank of New York last year, he added.
The deal's financial terms were not disclosed. Urdang is to operate as a wholly owned subsidiary of Bank of New York and retain its management team.
About 98% of Urdang's clients are institutional investors, Mr. Ferst said. They include corporate and public pension funds, as well as foundations.
Urdang manages both private real estate investments and portfolios of real estate securities, primarily publicly traded REITs. It invests in properties that have low relative prices or are in geographic areas perceived to have upside potential.
