UNITED STATES - Cornerstone Real Estate Advisers is to begin the marketing process for its next commingled fundraising.

The real estate manager is looking at raising around $400m ($297.1m euros) to $600m through the Cornerstone Hotel Income and Equity Fund II (CHIEF II).

Officials say they expect pension funds to be a major part of the money raise, as Chief I investors have already expressed an interest in a repeat investment.

One of these figures to be San Diego City Employees Retirement System, which made a $15m allocation to the first fund, while the Wisconsin State Investment Board will be placing some capital into CHIEF II.

One of the largest investors in CHIEF I was GM Asset Management with a $250m contribution, however, they are not expected to make another commitment so the real estate manager is hoping to replace them with an investor like Teacher Retirement System of Texas, a pension fund has $11bn of capital to be invested in real estate over the next 4-5 years.

The investment strategy for CHIEF II, which has a projected return mid-teens IRR over a 3-4-year holding period, is to invest in existing business hotels around the United States that have not had any new capital invested in them for several years. This could therefore add real value by improving the existing operation and in turn increase its income and occupancy.

Many hotel experts around the country are predicting there won’t be a hotel development boom for at least another 18 months, making existing properties more valuable.

Cornerstone is looking at a variety of investment opportunities in renovations and re-flagging situations in the major US locations.