REAL ESTATE - The Sacramento County Employees Retirement System has awarded Cornerstone Real Estate Advisers a new $15m allocation for its separate account relationship. This action was taken at its board meeting on October 19.
The pension fund made this decision because it wanted to give Cornerstone enough capital to fund more acquisitions. Chief investment officer Jeff States said: "Our goal here was to allow the manager to still be an active player in the marketplace. Prior to our meeting, they had around $20m of equity left to spend on future acquisitions. We wanted to give them a little more buying power."
Sacramento County was a little bit hamstrung as to how much it could capital could be allocated to Cornerstone. States said, "We were limited in the size of the allocation that could be awarded. Because of the commitments we have made recently to value-added funds, if we gave Cornerstone a larger allocation, there is a chance that we might have had to ask for some of the allocation to Cornerstone to be returned in the future. We certainly didn’t want to have to do that."
The new allocation now gives Cornerstone a total of $35m of equity to invest for new acquisitions. The total capitalization available is now at $40-$50m, which includes leverage.
The pension fund figures that the capital will be used to acquire either apartments or office buildings. These are the two property types needed to round out the portfolio. The favored markets for a purchase will be the Northeast like Washington, D.C. and the West Coast.
Cornerstone has full investment discretion on its separate account relationship with Sacramento County. This means that the real estate manager can acquire properties on its own without any approval needed from the pension fund. The separate account relationship has a core investment strategy.
Sacramento County recently completed a new acquisition through Cornerstone. It bought the 202,000 s.f. Flying Cloud office building in Eden Prairie, Minn. This property is considered a typical suburban office building.
The purchase price was $31.2 million. This was an all-cash transaction. The property was developed in 1987. Occupancy at the time of closing was 93.4%.