NORTH AMERICA - The City and County of San Francisco Employees' Retirement System has approved a commitment of as much as $44m (€36m) into the Rockpoint Real Estate Fund IV.
Lindsey Adams, a senior real estate portfolio manager, cited the fund's ability to exploit opportunities in distress or liquidity of current borrowers or lenders, commercial repositioning, controlling debt positions of distressed assets or structuring preferred equity and mezzanine debt positions and selective commercial and residential lot development.
The other managers considered for the commitment were Blackstone, Westbrook and Oaktree Capital Management.
The investment objective for Fund IV is to achieve annualised returns of 20% gross IRR and 15% net.
Rockpoint has a desired target capital raise of $2bn with a hard cap of $2.75bn and a final closing expected in November.
The fund manager has attracted capital from a mixture of public and corporate funds, including Florida State Board of Administration, New York State Teachers Retirement System, New Mexico Employees Retirement Benefit Plan, Texas Employees Retirement System and the corporate pension funds of Lockheed Martin and IBM.
Rockpoint will be making a co-investment into the fund of 1.5% of the total capital commitments, while the leverage component is projected to be between 50% and 60%.
The fund will focus on the office, multi-family and hospitality sectors in select coastal markets in the US, including Boston, New York City, San Francisco, Southern California and Washington, DC.
Some deals will also be located in Western Europe and Japan.
Rockpoint will focus on small and middle-market deals where the equity requirement is between $10m and $100m.
The company has closed on two deals for Fund IV. One was a $10.5m equity investment to buy the 127-room Belamar Hotel in Manhattan Beach, California.
The value-add component of this property is through improved management.
The manager paid $31m in equity to buy two adjacent office buildings known as One SoHo Square in New York City. The properties are just under 660,000 square feet.
Rockpoint figures that depressed in-place rents will provide the opportunity to substantially increase cash flow without underwriting large market growth.
The commitment to Fund IV is the first of as much as $400m that could be invested in non-core investments for San Francisco for fiscal year 2012-13.