UNITED STATES - Oregon Public Employees Retirement Fund has approved a $100m (€78.7m) commitment to the Vornado Capital Partners investment fund.
According to pension fund officials, the investment will allow Oregon PERF to invest in office and retail properties predominantly in New York City and Washington DC, offering the pension fund its first exposure to these markets.
Vornado Capital Partners is being structured as a club fund with a limited number of other investors, and including a $200m co-investment from Vornado, a $14bn public real estate investment trust (REIT).
Vornado will manage the direct investments and its strategy will be to buy existing properties and remodel them. Some of the deals are expected to be assets that have been under managed by prior distressed owners.
Vornado Capital Partners is the first closed-end commingled fund vehicle with institutional partners for the REIT. The company's entire acquisition team will be dedicated to finding investments for the fund during the acquisition period.
According to Oregon PERF officials, one of the winning points for investing in the fund was its fee structure: there will be no fees for committed capital that has yet to be called on; the management fee is 1.5%.
The new commitment from Oregon PERF will help fill a hole in the value-added section of its private real estate portfolio. As at 31 March 2010, the pension fund was below its value-added target allocation of 20%, with only 13% of its real estate portfolio invested in this strategy.
Vornado is still raising capital for the fund. The investment period runs for three years from a final closing and the life of the fund runs for eight to 10 years.
There will be 50% leverage employed in the commingled fund. Investors in Vornado Capital Partners have been projected to receive a targeted gross internal rate of return of 15-20%.
