UNITED STATES - New Jersey Division of Investment has approved $250m (€161.4m) worth of commitments to non-core real estate.
The pension fund decided at its June 19 board meeting the non-core investments are right in line with the pension fund's real estate strategy for 2008, which is to invest only in non-core real estate, this year, given its concerns about the pricing of core properties.
On the advice of real estate consultant The Townsend Group, New Jersey made a $150m commitment to the Morgan Stanley Real Estate Fund VII Global opportunity fund, which in turn is looking to raise $10-12bn of equity for the commingled fund.
Morgan Stanley will co-invest 10% of the commingled fund's total equity, up to $500m and 70% leverage will then be placed on the fund which has been targeted to achieve gross IRR of at least 20.
This is expected to be delivered by investing in corporate and government divestitures, public-to-private transactions, distressed opportunities from motivated sellers and development projects, so 25% of the assets will be placed in the US, 25% to developed Asia with a specific focus on Japan, 25% to Western Europe with a focus on Germany and 25% to emerging markets with a focus on China - where most of the development projects for this particular fund are.
At the same time, New Jersey has also made a $100m allocation to the $1.75bn TA Associates value-added commingled Fund IX, projected to return gross IRR of 16-17%.
Its strategy is to buy in excess of 100 US properties - office, industrial, retail and residential - which currently generate strong income and then actively manage the leasing to create value.
Up to 75% of the deals for the fund will be in suburban locations along the East and West Coasts while the balance of the portfolio will be in the Midwest.
The real estate manager is looking to close deals considered to be small-to-medium in size, so with a gross value of $20-50m.
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