REAL ESTATE- The Los Angeles Fire & Police Pension System has made $130m (€102.2m) in real estate investments by committing capital to a new REIT manager and two commingled funds.
The fund selected Principal Global Investors as its third REIT manager at its board meeting on April 20. The other finalist for this capital was Advantus Capital Management. A factor in the decision was that the fees for Principal would be around $100,000 a year less than Advantus.
Los Angeles Fire & Police has awarded Principal an allocation of approximately $70m. This capital will be invested on a separate account basis.
This decision now gets the pension fund to its 15% allocation for investing in REITs. This amounts to around $210m of capital. The other two REIT managers are Adelante Capital Management and Morgan Stanley Investment Management.
The scheme has approved a $30m commitment to the CPI Capital Partners Europe - the real estate manager for this fund is Citigroup Property Investors.
The pension fund will be getting a break on the fee schedule for this fund. This is because its real estate consultant, The Townsend Group, negotiated discounted fees to all Townsend clients that approve an investment in the fund.
Fees will be determined by the aggregate capital CPI raises from Townsend clients by the final closing of the fund. The fee break could be 20 to 50 basis points off the investment management fee and a preferred return of 10% rather than the fund level 9% return.
Los Angeles Fire & Police has committed to invest $30m into the Stockbridge Real Estate Fund II. This commingled fund is run by Stockbridge Capital Group.
The pension fund thinks that this investment will give it access to much larger mixed-use transactions that are not available to smaller commingled funds and separate accounts.
The commingled fund already has some pre-specified assets. These include a couple of projects in Southern California. One is the redevelopment of Hollywood Park and an office development in Burbank. Investments for the fund are projected to achieve in excess of 16% net to the investors.