REAL ESTATE – California Public Employees Retirement System has approved two opportunistic real estate investments totaling $155m (€118m).
One of these investments was $80m that was placed into the Fortress Holiday transaction. This is an investment where Fortress Investment Group, LLC is in the process of buying substantially all of the North American senior housing operations and facilities of Holiday Retirement Corp. The deal is set to close sometime in the first quarter.
One person who worked on CalPERS’ commitment was its Investment Officer III, Jane Delfendahl. She said: "We believe in the demographics of the senior housing and think that this is a very unique transaction."
The total cost of the deal is $6.8bn, with $2bn of equity in the transaction. Fortress Fund IV is putting $500m into the deal. Another $1.5bn that is to come from a co-investment fund formed by Fortress and backed by capital from major institutional investors. There is where the CalPERS capital was invested. The pension fund expects to achieve a 20% net return on its investment.
The California State Teachers Retirement System has invested $265m in the Fortress Holiday investment fund.
Holiday Retirement is a major owner and operating of senior housing assets. The company and its affiliates manage more than 85,000 units of senior housing in the United States, Canada and the United Kingdom.
CalPERS has also made a $75m commitment into the Savanna Real Estate Fund I. Portfolio Manager at CalPERS Judy Alexander commented: "This is a fund that will allow us to expand our value-added strategy to the north-east corridor of the United States. We have this strategy in other markets like California."
The pension fund is projecting that its investment will produce a 17% net return.
Savanna Partners is the real estate manager of Savanna Real Estate Fund I. The manager is hoping for a total equity raise in the range of $300m to $400m.
The investment strategy for the commingled fund is to buy distressed assets, which would be with existing properties only. This will involve a combination of apartments, office buildings, shopping centres and industrial properties. All of the assets with be in the north-eastern seaboard down to Virginia.