UNITED STATES - Los Angeles City Employees' Retirement System has asked Integrated Capital to change the agreement it made concerning the Capital Hospitality fund so it can go ahead with investment plans.

LACERS has persuaded Integrated to accept a lower amount of capital in the commingled fund than it previously planned to raise, as the firm has found it difficult to hit its funding target yet the pension fund wants to begin its investment.

The pension fund had approved a $10m (€7.6m) commitment to the commingled fund in April 2008 although this investment had been contingent upon Integrated Capital raising another $100m for the commingled fund.

The real estate manager has only been able to raise $90m of equity for the fund in the current economic climate but LACERS does not want to stall the commingled fund moving forward as pension fund officials believe there are going to be good investment opportunities in hotels this year.

That said, hotels are one property type which could be greatly affected by poor economic conditions in the United States - the fund's target market.

Industry experts are predicting there will be an 8-10% drop in RevPar earnings for 2009 and suggest the hotel market will not really begin to improve until 2010.

LACERS has put in a second stipulation to the Hospitality Fund which requires Integrated Capital make at least eight investments within the investment period, to ensure adequate diversification within the fund, though this was not part of the commingled fund's original investment strategy.

LACERS was advised in its decision earlier this month by its real estate consultant, Courtland Partners.

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