REAL ESTATE - The Jacksonville Police & Fire Pension Fund in Florida has doubled its real estate allocation with the $16.5m (€12.2m) acquisition of a former AOL call centre in the state.
Pension fund executive director John Keane said the block, which was completed in 2003, offered advanced construction – "important in a hurricane zone" – and a 1,200-vehicle car park in a high-growth area. The yield on the transaction is 18.35%, 9.85% of it rent, with appreciation of 8.5%.
However, the pension fund is unlikely to hold onto the building. Under the deal, long-lease tenant the University of North Florida will rent the building for $.16m annually, with an option to purchase it with 10 years. Local press reports suggested that the university plans to buy the building in the autumn.
The pension fund’s first purchase outside Jacksonville’s downtown business district is unlikely to be its last because cumbersome regulatory processes and a paucity of acquisition targets that would be cost-efficient to develop are driving it outside the district.
It already owns and manages a three-story office building with an adjacent seven-story car park and a six-story office building it is re-developing for long-term lease.
"The purchase of a 125,000 square foot property more than doubled our local real estate holdings," said Keane. The fund also has a $75m core real estate account managed by JP Morgan.
The fund’s strategy to date has been to redevelop distressed real estate on long-lease to stable tenants. Despite Keane’s optimism for the sector, state law caps the fund’s real estate allocation at 10%. "We are working to change that," he said.
The fund’s current allocation, including last week’s deal, is 9.3%.