Arizona State Retirement System is planning to sell around $2bn (€1.8bn) worth of real estate assets over the next two fiscal years, to help capitalise on assets that have increased in value and to reduce the number of underperforming assets within its real estate portfolio.

The pension fund’s real estate investment consultant RCLCO Fund Advisors disclosed in a meeting document that part of the reason for the disposals in the fiscal years beginning 1 July was also to help realign the pension fund’s $9.8bn real estate portfolio with its real estate allocation target.

As of the end of the third quarter of last year, Arizona State Retirement’s real estate portfolio represented 20% of the pension fund’s total plan assets. During the same time period, Arizona State Retirement decided to lower its real estate allocation target to 17% from 20% with a +/-4% allowance.

Part of the disposal proceeds will be used to fund new real estate investments. Over the next two fiscal years, Arizona State Retirement also expects to receive $1.2bn from fund distributions which would serve as additional capital for real estate investments.

The pension fund’s real estate portfolio has mainly been focused on the development of both multifamily and build-to-rent single-family rentals and the acquisition of industrial warehouses. The portfolio is also adding exposure to data centres and life science real estate.

So far this year, Arizona State Retirement has added $200m to its existing multifamily investment relationships with Related Fund Management, the pension fund told IPE Real Assets. Related Fund declined a request for comment.

Arizona State Retirement has also placed $190m into life science properties via Pacific Medical Buildings. The medical office building and healthcare real estate company did not respond to a request for comment.

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