REAL ESTATE- The Pennsylvania State Employees Retirement System has setup an investment program to invest in properties leased to the federal government.
The fund has agreed to invest $30m of equity into the Oxford Development Fund I. This is a commingled fund with the pension fund and Pittsburgh-based Oxford Development Corp.
There is a total amount of $37.5m of equity in the commingled fund. Oxford contributed $7.5m or 20% of the equity. The debt to equity ratio on the commingled fund is four to one. This will give the fund a total capitalization of $150m. Some of this capital will be recycled as there will be some properties sold shortly after they have been developed.
Pennsylvania State Employees made its investment decision at its board meeting in late April. The pension fund was recommended to take this action from its consultant, The Townsend Group.
The consultant’s principal, Rob Kochis, said: "There are two things we like about this program. One this that Oxford has qualified as a bidder for the government contracted buildings. This will give them access to deals.
“The other is that the federal government will work with vendors on larger deals if the vendor is well capitalized. This will certainly be the case for Oxford with the commitment from Pennsylvania. The bigger deals would be in the area of $50m to $100m."
Oxford Development Fund I is a build to suit development program. It would mostly involve office buildings. There also could be come courthouses. The assets could be leased to a variety of entities including the government services administration, the FBI or the Drug Enforcement Agency.