In the past three weeks, Northwestern Mutual has been especially active selling its multifamily assets. Just last week, the Milwaukee-based insurer and financial services firm sold three California properties totaling 1,368 units for more than $200 million and one Maryland asset for a reported $65 million. Less than two weeks earlier, it sold two other California properties for the San Francisco-based Prime Group for a combined $84 million.

Northwestern Mutual isn’t alone. ING Clarion Real Estate, Prudential Financial, and Principal Global Life have all joined the ranks of institutional investors recently selling off their multifamily assets. In fact, in the first quarter of 2008, Real Capital Analytics, a research firm out of New York, reported that institutional investors sold $203 million worth of apartment assets and bought none.

Northwestern Mutual declined to comment for this story, but Bill Huberty, a senior vice president with CB Richard Ellis, which represented the firm in one of its California sales, says Northwestern Mutual was focused on maintaining its AAA rating.

In February, Standard & Poor's lowered its credit rating on Prudential Financial, partially because of the insurer’s commercial real estate portfolio. That caused a number of other insurers to spring to action in order to protect their credit ratings and their existing costs of credit, says Nick Ingle, director of capital markets for Hendricks and Partners, a Phoenix, Ariz.-based broker that has represented Northwestern Mutual in the past.

“They may not have access to commercial paper any longer,” Ingle says. “We’re already in a credit-constrained environment. If they take a small loss [from the sale of an apartment asset], it's nothing compared to the operating loss for that company in an increase in their cost of credit.”

There’s also what’s known as the denominator factor. “With stock prices still down substantially, real estate assets can now account for higher-than-expected shares of the overall portfolios and to bring those weights down, some real estate assets need to be sold,” says Gleb Nechayev, a senior economist at CBRE Torto Wheaton Research in Boston.

Huberty doesn’t think these institutions will become buyers again until the overall market begins to head in a new direction. “It will change when the bid/ask spread narrows more significantly and the overall percentage of a particular pension fund/life company's real estate allocations falls back into line with the range the portfolio manager has targeted to optimize the portfolio,” he says.