REAL ESTATE - The San Francisco City and County Employees’ Retirement System has approved new real estate investments of $100m with Capmark Investments, L.P.
This action was taken by the pension fund at its board meeting last month. It was assisted in these actions by its real estate consultant, The Townsend Group.
One of the investments was a follow on investment with Capmark for the Multifamily Co-Investment program. The new allocation was for $25m. This will be matched by a $25m co-investment from Capmark. The new capital was necessary as the venture only had $11.6m left to invest, with $5.81m being contributed by the pension fund. Previously, the institutional investor had committed a total of $100m of equity to the program.
The new allocation by San Francisco City and County will be invested the rest of this year and the calendar year of 2007. The vast majority of the transactions will be with multifamily properties. The venture can invest in core, value and high return kind of strategies. The focus of the deals will be with value and high return kind of assets.
The net IRR to the investor is 13% for high-yield, 10% value and 7% core deals. The co-investment program has a 10-year term.
The main assets to be invested in will be apartments. There is a possibility that some niche property types would be considered like student housing and condominiums.
The venture will be looking across the United States for deals. This will be primarily in major metropolitan areas. The investments would involve in-fill, urban and suburban locations with high barriers to entry to add more properties.
The other venture with Capmark is creating a co-investment high return investment fund. Both San Francisco City and County and Capmark with are making a $75m investment to the program. This is a rare event where a pension fund and real estate manager invest the same amount in a co-investment. Typically, the real estate manager puts in 5% to 10% of the total equity as a co-investment.
The High Return Fund will be investing in a variety of property types. This includes office, industrial, retail, apartments, land, hotels, mixed-use and credit enhancement opportunities.
The projected returns to the investor is a net IRR of 15%, after fees have been paid. The fund lasts for five years. In some cases properties will be sold earlier rather than later.
Capmark will be looking for transactions all over the United States. This will be primarily in major metropolitan areas. Many of them will be in infill, urban and suburban locations that have high barriers for the construction of future projects.