UNITED STATES - San Diego City Employees Retirement System has approved its first ever international real estate investment by allocating $30m ($22m euros) to the Colony Investors VIII commingled fund.
San Diego City is expected to make at least one more commitment to an international commingled fund as the initial amount previously allocated for foreign real estate was $50m.
This first pension fund mandate was made at the fund’s June 15 board meeting with the assisted of real estate consultant The Townsend Group, according to Dawne Clark, according to assistant chief investment officer for San Diego City.
"We feel that an international real estate strategy will give us the change to achieve higher risk adjusted returns. Our investment plan is to place capital in funds that invest in non-US developed markets," she added.
Colony VIII has already seen investments from Los Angeles Fire & Police Pension System and Ohio Police & Fire Pension Fund as it is a high return investment fund projected to achieve a gross IRR of at least 20% and a 2.2x equity multiple.
Colony Capital anticipates the total fundraising will $4bn with its 75% leverage to invest in all of the main property types and hotels.
Perhaps more importantly, the investment strategy calls for 50% of the deals to be invested in Asia while Europe is another key target, particularly in France and Germany along with some investment in the United States.
Around 10-14 deals are expected to be completed each year with an average equity investment of $160m.