UNITED STATES - Alaska Permanent Fund Corporation has moved back into investing in the Chicago real estate market for the first time in several years, through the purchase of The Shops at North Bridge.

The pension fund had been looking for a real estate investment in the Windy City for over 12 months, according to Mike Burns, chief executive officer for the Alaska fund.

"We had a significant hole in our portfolio and are very pleased to have an asset of this quality under our ownership. We look at this as a trophy property that would be very hard to duplicate," said Burns.

Alaska owns an additional retail and five hotel properties - purchased for $515m (€345.4m) - through this 50/50 joint venture with The Macerich Company but the pension fund has a total real estate portfolio valued at $4bn, as of January 11, or representing over 10% of the plan's $38.5bn in assets.

Its new owners have assumed existing financing of $205m on an interest rate of 4.67% so there was $310m of equity in the transaction, split equally between Alaska and Macerich, while the cap rate on the deal was a little over 5%, based on the existing income earned from the property.

Bernadette Mussell, director of acquisitions for L&B RealtyAdvisors - separate account manager to Alaska - worked on the transaction and believes the property should attract local and international customers, to the benefit of the Alaskan pension fund.

"Had the debt that we assumed not been so attractive, we would have put more leverage on the deal.  The amount would have been in the range of 50% to 60%."

"Being situated on Michigan Avenue will attract people to our property from all over the world.  This property should perform well in even difficult economic times."

Alaska has a targeted allocation for real estate of 10%.  The real estate portfolio is split with 80% being private and 20% public.

Topics