REAL ESTATE - New Jersey Division of Investment is looking into making commitments into three commingled funds totaling $200m (E147.5m).
These investments were discussed at its board meeting on April 19. The pension fund was assisted in this activity by its real estate consultant, The Townsend Group.
The largest of the commitments being looked at was a $100m commitment to the AEW Core Open-End Fund. This is a commingled fund that is being raised by AEW Capital Management.
There is an initial raise for the fund of $800m, which involves a select group of seed investors for the fund. These initial investors in the fund will be offered a substantial reduction in the base asset management fee on the initial commitment amount. This is inclusive of future appreciation in value and reinvestment of operating dividends.
The commingled fund has a core investment strategy. Around 85% of the fund will be investing in established and leased assets, involving office, industrial, retail and apartments, but only US-based assets will be considered. No more than 15% of the fund can be in invested in value-added strategies and leverage on the portfolio will not exceed 30%.
The second commingled fund being considered is the CIM Real Estate Fund III. The commitment amount is $50m. The CIM Group is the real estate manager on the fund. New Jersey has invested with this manager in the past. The pension fund had closed on a $50m investment with the manager in June 2006 for the CIM Urban REIT.
Real Estate Fund III is a value-added fund, which is to focus on making investments in underserved urban areas with high population density. This would include traditional downtown areas and suburban main streets in North America.
The property types being considered are multifamily residential, retail, office, parking and mixed-use. The commingled fund will have an emphasis on California, metro Washington DC and the Northeast. It is anticipated that investors in the fund will achieve 20% IRRs net of fees and an equity multiple of 2.0 times.
The other commingled fund being looked at is the Capri Urban Investors, where New Jersey is pondering a $50m commitment to the commingled fund.
Capri Urban Investors is a $2bn high return investment fund, with rojected returns for investors are a gross IRR of 18% and a net IRR of 15%.
The commingled fund is managed by Capri Capital Partners. The leverage on the portfolio will be up to 65%. There will be a wide variety of deals made for the commingled fund. Some will be income-producing stabilise assets. Others will be development and redevelopment projects.
All of the properties will be in urban locations. Around 90% of them will be in the United States. The other 10% will be in Canada, Mexico and Puerto Rico. The transactions will be structured as wholly owned equity investments, joint ventures preferred equity and mezzanine investments.