real estate investment | Pension360

Los Angeles Pension Invests $500 Million In Real Estate

The Los Angeles County Employees Retirement Association (LACERA) has invested $506 million in real estate, including two apartment complexes, an office building and a distribution center.

From IPE Real Estate:

The US pension fund agreed eight separate account purchases in gateway and secondary markets.

Two of the investments, made by Clarion Partners, were in core assets and leveraged at 50%.

LACERA invested $300m in the Palazzo-Westwood apartment complex in Los Angeles, which, over 10 years, is expected to achieve a projected 8.5%. The pension fund took an interest-only, seven-year facility at a fixed 3.4% rate.

Clarion also bought the 138,000sqft Las Cimas IV office building in Austin, Texas for $43m.

LACERA is looking to hold the asset for 10 years, with a projected 8.4% net-of-fee return.

The transaction was funded by a floating rate loan at an interest rate of LIBOR plus 180 basis points.

Deutsche Asset & Wealth Management bought two properties for LACERA.

The $35m all-cash acquisition of the 525,000sqft Ingram Micro Distribution Center in Chicago is projected to achieve a net 8.95% IRR over 11 years.

LACERA expects a 8.25% return over 10 years for the North Clark apartment complex in Chicago, bought for $51.1m.

Stockbridge Capital Group bought two core assets and two non-core properties, investing $62.4m in the 208,705sqft Pinole Vista Shopping Center in Pinole, California and the Junction Business Park in San Jose, bought for $14.2m.

Pinole Vista is projected to achieve an 8.6% net IRR.

Non-core assets in San Diego and Fremont were also bought for a respective $16.4m and $13.4m, with expected net-of-fee returns of 9.25% and 9.5% over five and three year holding periods.

LACERA manages approximately $38 billion in assets.

CalSTRS Loses $125 Million on Florida Industrial Land

CalSTRS revealed Thursday it had lost $125 million on an investment – reportedly written off since 2009 – in a piece of industrial land in Florida that lost much of its value when land values went bust just over a half-decade ago.

CalSTRS had been waiting for the price of the land to recover a bit before selling – and the fund did recover some of its losses.

But the time to sell was now given the fund is restructuring its real estate portfolio.

More details from the Sacramento Bee:

CalSTRS said Thursday it lost around $125 million on the sale of some Florida real estate […]

The California State Teachers’ Retirement System confirmed that one of its investment partnerships recorded a $132 million loss on the recent sale of a swath of industrial land in Florida’s Palm Beach County.

CalSTRS spokesman Ricardo Duran said the teachers’ pension fund owned 95 percent of the investment and took 95 percent of the loss.

The deal was first reported by the Palm Beach Post and South Florida Business Journal.

Duran said CalSTRS wrote off the investment entirely in 2009, so the sale price represents a partial recovery of its losses. The sale price was nearly $3 million higher than CalSTRS valued the land in the third quarter of this year.

CalSTRS decided not to wait any longer for land prices to recover, however. “The likelihood of getting what we paid for it anytime soon is pretty remote,” Duran said.

Besides, CalSTRS wanted to unload the property as it implements a restructuring of its real estate portfolio, moving away from speculative land deals in favor of leased-up, income-producing properties. “This is part of our de-risking,” Duran said.

CalSTRS manages a $189.7 billion portfolio.

Photo by Stephen Curtin

Washington Pension Manager Commits $1.1 Billion to REOCs

The Washington State Investment Board, the entity that manages Washington state’s pension assets, has committed a total of $1.1 billion to two funds that invest in real estate operating companies (REOCs).

From IPE Real Estate:

Commitments of $600m and $500m were made to Calzada Capital Partners and Evergreen Real Estate Partners, respectively.

[…]

Calzada, which buys real estate operating companies in the Americas, places capital with companies investing in major property sectors.

It has around $4bn in assets under management.

The private equity firm has invested in Terramar Retail Centers, which owns neighbourhood shopping centres on the US West Coast, as well as in Corporate Properties of the Americas, which owns industrial property in Mexico.

Hometown America, an owner and operator of manufactured housing, Pacific Beachcomber, a luxury hospitality renovation firm in French Polynesia and Pivotal Capital Group have also received capital as part of Calzada’s niche investment strategy.

Evergreen, which invests in US-based real estate operating companies, will use capital for future growth.

The company mostly makes investments in the office, industrial, retail and apartment sectors.

The Board manages $103.6 billion in assets.

Photo credit: “Washington Wikiproject” by Chetblong – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Ohio Police and Fire Pension To Invest Additional $200 Million in Real Estate in 2015

The Ohio Police and Fire Pension Fund has set aside $200 million to be allocated to real estate in 2015. It plans to make a series of investments, sized from $40 million to $70 million, to as-yet-unnamed managers

From IPE Real Estate:

The capital is being allocated as part of the pension fund’s 2015 real estate investment plan, with some capital to be invested outside the US, including Europe and Asia.

Ohio Police & Fire said it would only consider tactical or non-core opportunities via funds.

It said its current real estate portfolio had reached its allocation levels for core real estate, and that it would not be conducting any new manager searches.

The investor will receive recommendations from The Townsend Group on where capital will be invested.

Potential new investments will range from $40m to $70m.

Ohio Police & Fire’s portfolio is currently valued at $1.4bn, or 9.6% of its total investment portfolio, as of the end of November.

The fund has a 12% targeted allocation for real estate.

The pension fund’s most recent commitment was approved last month, an allocation of up to $50m for AEW Partners VII, a fund that buys distressed US properties in primary and secondary markets.

The Ohio Police and Fire Pension Fund manages $14.52 billion in assets.

Pennsylvania Public School Pension Commits $200 Million to Senior Housing, Other Real Estate

The Pennsylvania Public School Employees’ Retirement System (PSERS) has committed a total of $200 million to two different real estate funds, one of which will invest in senior housing and assisted living properties. The other fund will invest in REITs.

Details from IPE Real Estate:

The fund has made $100m commitments to Prudential Real Estate Investors’ Senior Housing Partnership Fund V and Almanac Realty Investors’ Securities VII fund.

Laurann Stepp, senior portfolio manager at Pennsylvania, said the fund was attracted to senior housing in the US, where she said there are 19m 75+ seniors – an age group expected to grow in the next decade.

Stepp said Pennsylvania was also motivated by the fact senior housing construction had stalled since 2007 as a consequence of a lack of financing during the financial crisis.

PREI is targeting a $500m raise for Fund V, which will focus on US for-rent, for-profit, private-pay independent living, assisted living and memory care assets, with up to 20% to be invested in Canada.

The fund will invest mainly in income-producing assets with minimum 50% occupancy.

Some investments may be structured as forward equity commitments on newly constructed properties.

Almanac, which is looking to raise $1bn for Securities VII, has so far received $765m in commitments, according to sources.

The fund, which will provide growth capital for either US real estate operating companies or public REITs, will structure its investments as either convertible debt or preferred equity.

Targeted returns for Securities VII are 12-14% net IRR, with no leverage.

PSERS managed $53.3 billion in assets as of June 30, 2014.

Texas Teachers Commits $865 Million to Real Estate

The Teacher Retirement System of Texas has committed $865 million to several real estate funds that will invest in Europe, the U.S. and elsewhere around the globe.

Details from IPE Real Estate:

The US pension fund approved a $465m allocation to Westbrook Partners’ UWS Co-Investment 9 venture. The manager, which did not comment, will invest in special situation opportunities on a global basis.

Westbrook is active in the US, as well as London, Paris, Munich and Tokyo.

Texas also made respective $150m and $50m commitments to Square Mile Capital Management’s Credit Partners and Tactical Partners debt funds. Square Mile declined to comment.

Credit Partners, which will raise $750m, includes a $200m co-investment by the manager.

USAA Real Estate Company, which invested in Square Mile in 2012, is understood to be behind the manager’s commitment.

Credit Partners, which is targeting 10% to 12% gross IRRs, will provide new loans, including mezzanine debt on major property asset classes, avoiding land and single-family residential.

Around 85% of capital will be invested in the US, with the remainder in Europe.

Texas Teachers also approved a $200m commitment to Almanac Realty Investors’ Securities VII, investing $100m directly into the fund and $100m into a sidecar for the same fund for co-investments. The fund focuses on US REITs and real estate operating companies.

TRS Texas manages $124 billion in assets.

New York Common Fund Commits $200 Million to Urban Real Estate

The New York Common Retirement Fund has committed $200 million to a fund that invests in real estate in New York City, Los Angeles and other urban areas.

Virginia Pension To Put $100 Million in Blackstone Real Estate Fund

The Virginia Retirement System (VRS) has committed $100 million to a Blackstone real estate fund that will invest in large office, retail, and apartment properties.

From IPE Real Estate:

The Virginia Retirement System (VRS) has allocated $100m (€80.1m) to the core-plus Blackstone Property Partners fund.

The open-ended fund, which invests in a combination of core, value-added and opportunistic strategies, is targeting returns of between 9% and 11%.

[…]

The pension fund is the third to commit to the Blackstone vehicle, following $100m in overall commitments from the Arizona State Retirement System and the Texas Permanent School Fund – the latter being one of the first to invest in the fund.

Blackstone is co-investing $75m in the fund, which will be 50% leveraged.

The manager will buy larger properties and portfolios across the office, industrial, retail and apartment sectors.

Blackstone, traditionally an opportunistic fund manager, can buy either directly or invest in real estate operating companies.

VRS, which has no targeted allocation to real estate, had a total $6.84bn in its real assets category as of September.

VRS manages $66.1 billion in assets.

New Jersey Pension Shifts $100 Million From U.S. to Asian Real Estate

The New Jersey Division of Investment, the arm of the state government that manages and invests pension assets, is pulling $100 million out of U.S. real estate and shifting the money to a fund that invests in Asian real estate.

The fund will invest in real estate in China, Japan, Singapore and Australia. More details from IPE Real Estate:

The New Jersey Division of Investment is pulling capital out of two core US real estate funds and redeploying it into an Asia-Pacific property fund.

New Jersey is redeeming all of its $91m (€73.2m) interest in the AEW Core Property Trust as well as a partial redemption from its $400m interest in the CT High Grade Partners II fund.

The pension fund has approved a $100m commitment to SC Investment Management’s Real Estate Capital Asia Partners I, which will be funded by the two redemptions.

Following a recent recovery in US real estate prices, New Jersey decided to rotate capital from existing managers to new opportunities. Over the past several months, the pension fund has been evaluating core investments it made between 2006 to 2008.

New Jersey is seeking to capitalise on sustained occupier and investor demand in Asia Pacific, driven by long-term demographic and urbanisation trends in the region.

[…]

SC Invesmtent is targeting a 9% return by investing in undervalued, under-managed and distressed properties where value creation opportunities exist.

According to New Jersey, SC Investment has been a consistent top-quartile performer. In the manager’s previous investment funds, deals generated a 35% gross IRR and 2.1x return, with proceeds of $600m.

The Division of Investment manages $81.22 billion in pension assets.

Hawaii Pension Commits $105 Million to Non-Core Real Estate

The Hawaii Employees’ Retirement System approved three commitments Thursday to three real estate funds, totaling $105 million.

The pension system has worked with all three funds previously, and that familiarity played a role in the new commitments.

From IPE Real Estate:

The pension fund approved follow-on commitments of $40m each to Almanac Realty Investors’ Securities VII and AG’s Core Plus Realty Fund IV, as well as a $25m allocation to Prudential’s Senior Housing Partners V fund.

[…]

Hawaii Employees is one of the first pension funds to commit to Almanac Realty VII.

The fund had previously made a $20m commitment to Almanac Realty VI.

The manager, which declined to comment, is seeking a total capital raise of $1bn for the latest fund, according to industry sources.

Typically unleveraged, the fund will be backed by the manager with a 1% commitment of the total capital raise, or $10m.

With a targeted IRR of 12-14%, all of the capital will be invested in the US.

Almanac will look to provide growth capital for private real estate operating companies and public REITs.

Angelo Gordon will buy existing sub-performing office, retail and industrial assets for its Fund IV, placing a heavy emphasis on the top-15 US markets.

Hawaii had approved a $25m allocation to the manager’s Core Plus Realty Fund III.

Pramerica Real Estate Investors is seeking a $500m capital raise for Senior Housing Fund IV, which will invest in independent and assisted living and memory care.

Hawaii Employees had previously allocated $20m to Prudential Senior Housing Fund III.

Hawaii, which could make additional investments in non-core real estate funds, will be conducting an asset liability study next year, with the help of its investment consultant, Pension Consulting Alliance.

The outcome of this study could change its future target allocation for real estate from its current 7% allocation.

The Hawaii Employees’ Retirement System manages $12.7 billion in assets for 115,000 members.

Photo by grantzprice via Flickr CC License

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