New Jersey Division of Investment has been turning to real estate investment trusts (REITs) as it scrambles to redeploy capital quickly into an increasingly competitive real estate market.
The $75.3bn (€70.5bn) institutional investor, which manages seven New Jersey pension funds, has increased the size of its REIT portfolio from $100m to almost $900m in just over three years.
Since the beginning of July this year, New Jersey has injected $230m of new capital into the listed vehicles, according to a board meeting document.
REITs now account for approximately 20% of New Jersey’s real estate exposure, up from 4% at the middle of 2012.
The growth has been funded by capital returned to the investor from sales made by its private real estate fund managers.
Over the past three years, its real estate investments have generated a net cash flow of $750m.
Pressure to redeploy the capital into increasingly competitive real estate markets, exacerbated by an increase in its real estate allocation from 4.5% to 6.1% over three years, has led the New Jersey to invest in REITs.
New Jersey said its REIT investments, which are managed internally, had delivered returns comparable to its private real estate investments and outperformed its overall portfolio.
Over three years, its North American core REIT portfolio returned 13.4%, while its global REIT portfolio generated 11.7%. Both returns were below the 14.2% generated by the private real estate portfolio, but above the 8.6% generated by the overall portfolio.
The core REIT portfolio, which invests in the US and Canada, was valued last month at $405m. The global REIT portfolio was valued at $495m.
The core portfolio is benchmarked against the FTSE EPRA NAREIT index and the global portfolio is benchmarked against the FTSE EPRA/NAREIT Developed index.
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