REAL ESTATE - The California Public Employees Retirement System(CalPERS) has agreed to invest $285m (€213.5m) into real estate partnerships investing in Mexican and Brazilian real estate.
Both of the partnerships will continue an on going relationship with its separate account manager Hines. The venture for investing in Mexico is HCM Holdings II, which has committed equity committed totalling $100m.
CalPERS put in 95% and Hines the other 5%. The ownership makeup of any assets in the partnership is the same as the equity contributions.
Robert Eberhardt, portfolio manager on the real estate investment staff for CalPERS, said: "Hines has been successful with the placing of the equity for the first fund.
"We believe in the growth that is happening with the Mexican middle class population. These people need a place to live and shop for goods and services."
The investment strategy for HCM Holdings II will be to develop a mixture of new real estate properties, with the focus on for sale-housing and retail properties.
The development of retail would be with shopping centres anchored by a variety of tenants. Some industrial developments could also be considered.
CalPERS and Hines will be focusing on investing in central Mexico in the areas near Mexico City and Monterrey. The partnership might look at some investment opportunities in the northern part of the country.
The pension fund is expecting to achieve gross IRRs in the mid teens to the 20% range and net IRRs of around 15%. These returns will have varying holding periods. They would be short on the for-sale housing investments. They could be three to five years for deals on retail or industrial developments.
The total capitalisation for HCM Holdings II will be around $300m, which will be accomplished by using leverage on the developments. There is a three-year investment period to find all of the transactions for the partnership, with one-year extension options available.
CalPERS and Hines have recently formed a second partnership investing in Brazil called HCB Holdings II. There is a total of $200m of equity in this venture with the pension fund putting in 95% and Hines 5%.
This partnership will also look to develop new properties in Brazil. Some will be the construction of for-sale housing. Industrial and office buildings will be developed for multi nationals and local corporations.