NORTH AMERICA – The Florida State Board of Administration has approved a 3% increase to its targeted allocation for real estate, raising it from 7% to 10%.
This means the pension fund will have around $4.1bn (€3bn) of new capital to invest in the asset class going forward.
It has a current net asset value on its entire portfolio of $141.5bn.
This action represents one of the largest new real estate allocations made by a pension fund in the US this year.
Steve Spook, senior investment officer for real estate at Florida, said the pension fund wanted to reduce the risk in the overall portfolio by lowering the allocation to the fixed income asset class.
This allocation was lowered from 24% to 18%.
Florida will be working with its real estate consultant, the Townsend Group, on its real estate investments with the new capital.
Spook said the scheme would be looking at a variety of investment structures, including commingled funds, separate accounts and joint ventures.
The new capital will be invested in a mixture of continuing existing relationships with managers and by hiring new managers.
In a board-meeting document, Hewitt Ennis Knupp said the increased allocation to real estate would have two investment goals.
One is to take advantage of unique opportunities in opportunistic/value-added and international real estate, while the other is to achieve additional diversification to core real estate.
Spook said Florida would aim to place capital in Europe, Asia and Latin America.
On the opportunistic side, the pension fund will look to invest in operation companies and development and the redevelopment of office, industrial, retail and apartments or specialised property types.
Leverage on this strategy will be at least 65%.
Respecting value-add, the pension fund will look at lease-ups, rehab and the repositioning of assets.
Leverage on these kinds of investments may be up to 65% loan to value.
Florida had a real estate portfolio valued at $10bn, as of the end of September, covering 7.2% of the pension fund’s $138bn of total plan assets.