NORTH AMERICA - Iowa Public Employees Retirement System has decided to drop TA Realty as a core separate account real estate manager and make UBS Realty Investors focus solely on apartments.
Judy Akre, director of communications, said the pension fund took the action due to a combination of TA Realty's investment performance and a desire to reduce the number of generalist core managers in the private real estate portfolio.
The core managers remaining will be UBS Realty, Invesco Real Estate, RREEF and Clarion Partners.
TA Realty was hired by the pension fund during the second quarter of 1998.
It had managed a portfolio - combining office, industrial, retail and apartments - valued at $293m (€235m), as at 8 June this year.
Invesco will now manage the assets in the portfolio, overseeing the eventual sale of the properties or transfer to its account.
Iowa PERS has also requested that UBS manage solely apartments for the pension fund.
Akre said Iowa PERS wanted its real estate portfolio to eventually have a strategic tilt towards apartments, and that UBS had shown skill in this sector.
UBS Realty, which currently manages a portfolio valued at $345m, will not be allocated any new funding.
Iowa PERS will amend the manager's mandate to be an apartment specialist going forward.
With the reduction in assets from the eventual elimination of the TA Realty portfolio, a strategic overweight should emerge.
Iowa PERS is also planning to make its first foray into a real estate debt strategy, which should eventually account for 10% of the pension fund's real estate portfolio.
Iowa PERS believes there is an investment opportunity for high risk-adjusted returns in high-yield real estate debt, and that the current and expected demand for capital to refinance commercial real estate greatly exceeded the supply of capital available, according to Akre.
The scheme plans to pursue mezzanine debt, B-notes, senior loans and bridge loans.
As at 8 June, the pension fund had a real estate portfolio valued at more than $1.9bn.
