REAL ESTATE – Three large California-based pension funds have been active in the real estate market recently.
They are the San Jose Federated City Employees Retirement System, the California Public Employees Retirement System and the Sacramento County Employees Retirement System.
The $1.6bn (€1.7bn) San Jose fund has chosen to invest a total of $40m into two commingled funds. It put $20m each into the American Stable Value Fund and the GE Value-Added Realty Fund.
"We were looking to invest in commingled funds that have a mixture of core and value-added investment strategies,” said Ron Kumar, financial analyst for the fund. “We also wanted investment funds where the capital would go to work right away. These two funds fit that strategy."
Meanwhile, CalPERS has expanded its senior housing portfolio with the construction of the Parc at Buckhead in Atlanta.
This project will involve the development of 193 units of high-end independent living kind of housing. The vast majority of people living in the project will be at least 75 years old.
CalPERS setup a joint venture for this project with the developer, Atlanta-based Parc Communities. The total development cost of the project is $60 million. The pension fund will be investing $15 million of its own equity into the development. In return for its equity, CalPERS will hold an 80% ownership position. The other 20% is owned by Parc.
And it has emerged that the $5bn Sacramento County scheme has approved its first ever value-added commingled fund real estate manager search.
The initial amount to be allocated for the search is 1.5% of total assets. This will give the pension fund $75m to invest. There is a chance this program could be expanded in the future by another 1.5% or $75m.
Sacramento chief executive Richard Stensrud said: "Our board thinks that this search will achieve two things for our portfolio. It will give us an additional level of diversification.
“It also will enable us to achieve some higher returns in our real estate portfolio. The investment threshold for the commingled funds will be a 200 basis point spread above NCREIF."
The fund will not be sending out an RFP for the search. It will be working with its real estate consultant, Mercer Investment Consulting, to come up with a list of potential candidates to take a look at.