REAL ESTATE – Additional pension fund capital in the United States is being invested in commingled funds with a foreign investment strategy. Two of the most recent examples of this are with Los Angeles County Employees Retirement Association (LACERA) and New Jersey Division of Investment.
LACERA has approved investments in two foreign investment funds. One is a commitment of up to a $19.7m (€15m) commitment into the CB Richard Ellis Investors Strategic Partners UK Fund III. The other was for up to $20.7 million into CB Richard Ellis Strategic Partners Europe Fund III.
New Jersey has agreed to allocate up to around $65 million into Europe Fund III. The pension fund made this decision at its board meeting on February 15.
LACERA took its action at its board meeting on February 14. John McClelland, principal investment officer of real estate for the pension fund, said: "We think that the two commingled funds have strong sponsorship, a good decision making team and a well defined investment strategy. It is our opinion that there are some good investment opportunities in Europe and will allow us to achieve diversification in our real estate portfolio."
UK III is a commingled fund that is targeting value-added transactions. It will be looking for properties that can be improved through releasing, redevelopment or better management.
The fund will be investing in all of the major property types of office, industrial, retail central London, which may include areas such as Birmingham, Manchester and the suburbs south east of London.
Europe Fund III looks to invest in more countries. This would include markets like France, Germany, Italy, Belgium, the Netherlands and Austria, also seeking value-added kind of transactions.
The commingled fund intends to split up the portfolio in three different property types. This would be around 60 to 65% in office, 20% residential and 15% to 20% in retail. The holding period on the investments is projected to be about five years once the assets are improved and stabilised for more traditional buyers seeking core assets.
The commitments made by LACERA represent its first two investments for its international real estate strategy. The pension fund has allocated 10% of its real estate portfolio in international assets, which amounts to around $380 million of available capital.
LACERA intends to invest internationally through commingled funds and real estate securities. The fund is planning on issuing an RFP later this year to hire one or two international REIT managers. The amount allocated for the search has not yet been established.