NORTH AMERICA – The California Public Employees Retirement System (CalPERS) has hired Invesco Real Estate to be its manager for apartments in the western region of the US.
The pension fund has awarded the manager an initial allocation of $250m (€190m), although Invesco will be considered for an annual allocation depending on how successful it is on placing the capital in the market.
CalPERS CIO Joe Dear said: "Invesco Real Estate's extensive experience and proven track record in multifamily investing make them a great fit for this programme.
"We're excited to work with them as we identify multifamily assets with both strong returns and the potential for future appreciation."
Ted Eliopoulos, senior investment officer for the CalPERS real estate programme, said:
"Adding a measured allocation to high-quality apartment assets will enhance the overall risk/return profile for the CalPERS investment portfolio."
Invesco will enjoy full investment discretion for the Multifamily Investors partnership, meaning it can make the final investment decisions on its own without the approval of the pension fund.
Max Swango, managing director at Invesco, said: "We are going to be looking for properties in the 10 largest apartment markets in the western region.
"These would include, Seattle, Portland, the San Francisco Bay Area, Southern California, Denver and Minneapolis.
"We do have our first transaction under contract, a property in San Francisco.
"We are hopeful of being able to close on this deal in the next 30 days."
CalPERS has an established leverage amount of 25% on its core portfolio, and the expectation is that this is the amount of leverage that will be placed on the Multifamily Investors portfolio.
Invesco said it expected to acquire 3-5 properties with the initial allocation.
"The markets we are going to be buying in have cap rates in the range of 4% to 5%," Swango said. "We plan on being a player in that range."
CalPERS already has a sizeable apartment portfolio, holding approximately $2bn of apartment assets within its $24.5bn real assets portfolio.
Invesco holds a direct real estate portfolio in the US valued at $18bn, as of the end of March.
According to Swango, roughly 30% of this is invested in apartments.