UNITED STATES - Pension funds in the United States are putting more capital into an urban investment strategy on the back of young professionals' demand.
San Francisco City and County Employees' Retirement System has approved a commitment of up to $50m (€35.7m) into the CIM real estate fund III while JP Morgan Asset Management has managed to raise $55m for its urban commingled fund, as it is understood young professionals and ‘empty nesters' increasingly want to live near work, shopping and entertainment facilities.
The percentage of one person households is projected to represent 27% of the real estate residential market by 2010, making it necessary for existing properties to be renovated and improved and new developments be built.
Demand is for apartments, retail and mixed-use with a residential component properties so San Francisco and County is expecting to make good gains on its investment with CIM Group.
The III fund has 31% of invested capital realized since its inception and has achieved an IRR of 59%.
In total, real estate fund III has raised $1.75bn in equity, as other pension funds see potential including CalPERS, which has committed $660m and the State of Michigan Employees Retirement System through is $75m investment.
Total capitalization is expected to be $4.4bn, on a 60% leverage, and investors in the fund are projected to achieve a 20% IRR, net of fees and an equity multiple of 2.0x.
JP Morgan is at this stage still raising capital for its commingled fund, including through pension funds, but will eventually invest in a variety of urban markets around the country.