UNITED STATES - City and County of San Francisco Employees' Retirement System has reduced significantly the amount of capital it is investing in real estate for the 2008/2009 fiscal year.

The amount being discussed for the next fiscal year is up to $200m (€127.7m), compared with the $750m allocated last fiscal year.

It's a move being seen across many US pension funds as many of them are concerned about the repricing of existing real estate and as well as the status of current market transactions and asset valuations.

San Francisco City and County said at its board meeting on May 13, having discussed it with real estate consultant The Townsend Group, the pension fund will be looking at making two commitments with Capmark Investments to expand existing relationships, so final approval on both investments is likely by the end of the summer.

One of these is a $25m allocation to Capmark Apartment Income and Growth Fund, having made another $25m allocated to the fund in November 2006.

Both Capmark and San Francisco City and County have a 50% ownership in the fund which focuses on investing in US apartments through value-added or high return kinds of strategies, so miche multi-family property types, such as student housing or condos, could be considered.

San Francisco City and County is looking at placing $37.5m into the Capmark High Return Fund, having again made a $75m commitment to this 50/50 relationship in November 2006.

The High Return Fund will invest in office, industrial, retail, apartments, land, hotels, mixed-use and credit enhancement opportunities to deliver a projected return to the investor of net 15% IRR, after fees have been paid.

The pension fund is also considering investing the remaining capital into other value-added or high return funds, such as commingled funds with an investment strategy in the United States or internationally.

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