REAL ESTATE- The Los Angeles Fire & Police Pension System made two real estate decisions at its board meeting on October 5.
The first item was to issue an investment of up to $15m to the Genesis Workforce Housing Fund II. The potential return for this investment is a gross IRR of no less than 15%.
The real estate manager for the fund is Phoenix Realty Group. Los Angeles Fire & Police had never invested with this manager in the past. The pension fund also had not put capital in a commingled fund with a housing investment strategy.
Phoenix Realty has a specialized investment strategy for Workforce Housing Fund II. This is to invest in attached housing developments near downtown or in transportation hub areas of Los Angeles. It will be targeting projects built for middle-income owners. Most of the projects will be for-rental and for-sale housing and some mixed-use developments. It will make equity commitments to the new projects. It will have three years to find all of the deals for the fund.
Phoenix Realty is still out raising capital for the fund. It’s hoping for a total equity raise of $150m. Pension funds are a targeted audience for the capital raise. The Los Angeles City Employees Retirement System was looking at making a $20m commitment to the fund.
The second real estate item for Los Angeles Fire & Police was the approval for due diligence for the acquisition of the 93,100 s.f. Colbalt Building in Seattle. The pension fund is projecting it will take at least another 30 days to complete the transaction.
The pension fund will acquire the property through its separate account real estate manager, Urdang Capital Management. The proposed purchase price is $20m with an additional $600,000 in closing costs.
The property is expected to produce a leveraged IRR of 11.8%. This return has factored in a six-year holding period.
Urdang Capital will be acquiring this property in a joint venture with Felton Properties. Los Angeles Fire Police and Felton will each hold a 50% interest in the property.
The asset is considered a core property. The building is now 100% leased. The Cobalt Group occupies 75% of the building. The lease has a term that lasts until December of 2010.
Martin and Daniel: Los Angles Fire & Police prefer that I summerize the information that I have gathered for this story and not to quote anyone.