REAL ESTATE - The Los Angeles City Employees’ Retirement System will be looking at investing in the MacFarlane Urban Real Estate Fund II and Buchanan Fund V.
The move came at its investment committee meeting on December 4. These investments have to be approved at a full board meeting before they can become final.
The pension fund is looking at making a $30m investment in the Urban Real Estate Fund II. The total raise in this fund is projected to be around $1.2bn. A final closing on the fund is anticipated to be sometime this month.
McFarlane Partners is the manager of the investment fund. It will make a co-investment to the fund for up to $15m. It’s projected that investors in the fund will achieve a net IRR in the range of 16% to 18%.
The commingled fund will be using leverage up to 75%. It has an eight-year life with the option of two one-year extensions.
The investing strategy for Urban Real Estate Fund II is to provide equity and debt financing for development or redevelopment projects in urban locations. The property types being considered are residential, retail and mixed use.
The commingled fund will be focusing on its core markets of Los Angeles, the San Francisco Bay Area and New York. It’s considering in other major metropolitan areas like Boston, Washington, D.C., San Diego, Miami and Seattle.
MacFarlane Partners is now reviewing 25 development projects for the fund. These ventures are worth around $4bn.
Los Angeles City is pondering a $30m commitment to the Buchanan Fund V. This is a high return fund sponsored by Buchanan Street Partners. The total amount of equity to be raised for the fund is $400m.
Net returns for the investor are projected to be in the area of 12% to 15%. The fund manager will make a co-investment to the fund for 10% of the total equity raise.
Buchanan Fund V will be trying to buy under performing existing assets. The properties can be improved through a re-lease, renovation or a reposition over a two- to three-year period after the acquisition. The property types could include a mixture of office, industrial, mixed-use and apartments.
There are 10 pre-specified assets in Buchanan Fund V. These properties represent 17% of the total fund. The transactions are with five office buildings, two industrial properties, two apartments and one mixed-use facility. Targeted net returns on these transactions are in the range of 13% to 19%.