The Los Angeles County Employees’ Retirement Association (LACERA) is helping to launch a new Deutsche Bank-sponsored real estate fund by seeding it with $308m (€276m) of assets.
The pension fund is selling a portfolio of industrial assets and will then commit $125m to become a cornerstone investor in the RREEF Core Plus Industrial Fund, according to a board meeting document.
The open-ended fund, managed by Deutsche Bank subsidiary RREEF America, is intended to grow to $2bn in size through third-party capital raising.
Deutsche Bank, which did not comment, will co-invest 4.99% of aggregated commitments, capped at $25m.
LACERA has hired Invesco Real Estate as an independent fiduciary to oversee the sale of the portfolio – which is managed by RREEF America through a separate account – to avoid any conflicts of interest.
The properties are located in Southern California, Seattle, Chicago and New Jersey.
They include 46 existing assets that are 97% leased and encompass 2.3m sqft of space.
There also is a development currently under construction and two shovel-ready joint-venture development sites that will add a further 1m sqft of space upon completion.
The board meeting document shows that LACERA believes it is a good time to sell the assets. The pension fund is over allocated to real estate by 1.5 percentage points.
A goal established in its 2016-17 investment plan was to reduce the allocation by becoming a net seller during the fiscal year.
The pension fund said the sales price for the portfolio reflected peak valuations for nearly all of the assets.
The return objective of the fund is to outperform the industrial sub-index of the NCREIF Property Index on a gross basis by 50-100bps.
The investment strategy will be to invest primarily in high quality properties that are income producing.
It will also acquire “transitional” properties and engage in developments. The fund defines transitional assets as those impacted by short-term risk – typically vacant space, required renovations or lease exposure.
Total debt exposure for the fund will be capped at 50% loan-to-value on a portfolio basis.
The targeted markets for the fund include Southern California, the San Francisco Bay Area, Seattle, Denver, Dallas, Chicago, Atlanta, Miami and New York/New Jersey.
