REAL ESTATE - The Los Angeles County Employees Retirement Association has placed its first ever investment in medical office buildings. This was accomplished with commitment of up to $25m (€19m) into the LaSalle Medical Office Fund II.

The decision was assisted in the allocation by its real estate consultant Townsend Group.

John McClelland, principal investment officer of real estate for LACERA, said: "We think now and in the future there is going to be a good deal of demand for medical office space.

"Many medical services are now happening outside of hospitals creating more need for medical office space. This property type has not become overbuilt at this time."

McClelland also believes in LaSalle for this property type, saying; "The people at LaSalle have a proven strong team and good track record of investing in medical office buildings."

The real estate manager for Medical Office Fund II is LaSalle Investment Management. The maximum equity that can be raised for the fund is $350m.

Investors in the commingled fund are projected to achieve a 10 to 12% IRR, net of fees.

LaSalle will be looking at a variety of deals for the commingled fund, some of which will be buying existing and leased assets. Current properties will be acquired that have a value-added component.

The real estate manager will allow up to 30% of the deals for the commingled fund to be development. It will be looking for assets that are spread out across the US. Currently, the fund holds no properties.

LACERA could be making more such medical office investments in future. McClelland said: "There is a possibility that we could be investing more capital in the property type down the road. At this point, we have not established or set aside a certain amount of capital for medical offices."