Mass PRIM places all REITs in one week

UNITED STATES - Massachusetts Pension Reserves Investment Management Board is a good example of the difference of investing in public and private real estate, as in the first week of March, the pension fund was able to place its entire REIT allocation for the year, worth $540m (€342.1m), in the market.

In contrast, Mass PRIM has not been able to acquire any properties for its private real estate program so far this year even though it has allocated as much as $300m for purchases of core and value-added real estate in 2008.

This situation is why many pension funds in the United States are investing more capital into public real estate as the capital can be placed into the marketplace quickly and the funds can then get a value of its portfolio on a daily basis.

The global public REIT capital Mass PRIM invested was funded by the 1% increased allocation for REITs approved by the board in February of this year.

Invesco Real Estate, Urdang Real Estate Securities, RREEF and European Investors assisted the process which saw Mass Prim buy stock in a variety of public companies, including Boston Properties, AMB Property Corp, Vornado Realty Trust, and Simon Property Group.

The pension fund would still like to find some properties for its private real estate portfolio as officials have allocated $100m this year to be invested, via RREEF, for value-added transactions.

There is another $100m-$200m which could be invested in core property types through separate account managers TA Associates, Invesco Real Estate, LaSalle Investment Management and JP Morgan Asset Management.

Mass PRIM has sold one property from its private real estate portfolio in 2008: the City Park industrial building in Houston, Texas, for $27.25m, and producing a 10.8% IRR.

The pension fund had owned the property, managed by Invesco, since 1996 and originally paid $20.65m for the asset.

Mass PRIM now has a real estate portfolio valued at $4.86bn to the end of February, amounting to 9.38% of its $52bn in total plan assets. Its targeted real estate allocation is 10%.