REAL ESTATE - The School Employees Retirement System of Ohio has approved a $50m (€37.5m) commitment into the Beacon Capital V.
This commitment falls in line with Ohio School Employees real estate investment plan for fiscal year 2007. This is to increase its exposure to investing in commingled funds that have either a value-added or opportunistic strategy and sell some of its assets in existing separate account relationships.
Beacon Capital Partners is the real estate manager of Fund V and the total equity raise projected is to be around $3.5bn. Pension funds are a big contributor to the commingled fund. One of the largest investors with a $400m commitment is the California State Teachers Retirement System. It's anticipated that investors in the commingled fund will achieve leveraged IRR returns of 18% to 22%.
The commingled fund only invests in the acquisition of existing office buildings. A portion of the capital for Fund V has already been placed in the market. It was part of a transaction that totaled around $6.5bn to acquire the former Equity Office Properties assets in Seattle and Washington DC from The Blackstone Group.
Beacon Capital wants to buy office buildings that are located in areas with much the same characteristics. These would be knowledge-based economies, have physical limits on new supply, are urban markets with greater liquidity, are considered a 24/7 city and have strong long-term demand fundamentals.
The vast majority of the deals for Fund V will be US located and include markets like New York, Los Angeles, San Francisco and Washington DC. Up to 20% of the fund could be placed into deals in international markets; among cities being considered are London and Paris.
Ohio School Employees has not finished investing in commingled funds and will look at funds that have either a value-added or opportunistic strategy. The pension fund now has total assets of $11bn.