REAL ESTATE - The Massachusetts Pension Reserves Investment Management Board has set aside $300m for a value-added strategy through one of its separate account real estate managers.
Mass PRIM has Lou Canlas as senior investment officer for real estate and timber. She said, "Our plan with this capital is try to find properties that are attracting less interest than is the case with core assets." Many pension funds are shying away from buying core assets as the returns have hit historical low levels.
Mass PRIM will invest the allocated capital through its separate account manager RREEF. The portfolio manager on the Mass PRIM account for RREEF is Jeanie-Marie Murphy, director of portfolio management.
The pension fund approved the allocation to RREEF at its board meeting on December 5th. The institutional investor was assisted in this decision by its real estate consultant, The Townsend Group. The person working on the account for the consultant is Principal Frank Blaschka.
This will be the first time that RREEF has gone after value-added deals for Mass PRIM. It currently manages a separate account made up of core assets. The current value of the portfolio is $1.2bn.
RREEF will have full investment discretion with the new capital if it stays within the parameters of the account. This means that the real estate manager can make the final investment decisions on its own, without any approval from the pension fund.
Some of the requirements for the strategy have yet to be worked out. One of these is projected returns. Canlas said, "We certainly want returns that are better than core. We haven’t set yet how much higher than core we would like them to be."
The pension fund will be looking at a variety of value-added deals. They could be buying existing assets that need a renovation or repositioning. There also will be some deals for investing in new development projects.
Mass PRIM wants to achieve diversification in the account by property type and geographical location. It will be investing in the four main property types of office, industrial, retail and apartments. The institutional investor wants a nationwide portfolio in the US in the major metropolitan areas.
Mass PRIM has a real estate portfolio of value at more than $4bn. It has a targeted real estate allocation of 10%. Its current investments in real estate amount to 11% of its $43.5bn of total assets. The institutional investor will be rebalancing its real estate portfolio through the sale of some of its existing assets.