REAL ESTATE - The Alaska Permanent Fund Corp. has approved a new real estate strategy to invest less in public real estate and allow a value-added component.
The pension fund made these changes as part of real estate resolution 06-07 at its board meeting on September 20.
The new and approved ranges are 80% for private real estate and 20% for public real estate. The previous percentages were 70% private and 30% public.
Dave Stuart, manager of real estate investments for Alaska, said: “We wanted to keep our neutral position with investing in public REITs. To do this we felt we needed to lower our exposure as there are fewer public companies to invest in with all of the public to private real estate deals that have occurred over the last 12 to 18 months.
“One of our real estate managers did some research on the subject and came up with a figure of $30bn to $40bn of capital that has been invested in these deals during that time frame.”
The plan for Alaska is to take the capital from public REITs and re-invest this along with property sales proceeds into non-core real estate. The pension fund has sold around $230m of its core real estate portfolio over the past 18 months. One example of this was a downtown office building in Louisville, Kentucky that was sold recently.
The non-core investment strategy for now would mean buying existing properties and improving them through a new leasing strategy or improved management. Down the road this could lead into potentially investing equity in new development projects.
Alaska will be investing this capital through its strategic investment managers. These are LaSalle Investment Management, L&B Realty Advisors, CB Richard Ellis Investors, Sentinel Real Estate Corporation and Kennedy Associates Real Estate Counsel.
The majority of the capital will be invested in the four major property types of office, industrial, retail and apartments. It’s likely that less will be done in apartments and more in industrial. This is because the pension fund is over allocated for apartments and under weighted in industrial. In the future, there is a chance that Alaska could place some capital in hotels.