UNITED STATES - Tennessee Consolidated Retirement System is getting close to making new investments in two core open-ended commingled funds, in a bid to gain diversification into office and retail real estate.

 

The pension fund is considering making $100m (€74.2m) allocations to the Strategic Property Fund managed by JP Morgan Asset Management and Trumbull Property Fund run UBS Realty Advisors.

 

The pension fund has mostly invested in real estate through separate account managers although it has invested in commingled funds on occasions via Lion Industrial Trust managed by ING Clarion and AMB Institutional Alliance Fund III controlled by AMB Property Corporation.

 

Pension fund documents suggest one of the benefits to investing in the two funds is it would give Tennessee Consolidated the opportunity to invest in large office building and regional mall properties worth far in excess of $100m.

 

Another positive outcome of placing capital in these commingled funds is they provide greater diversification than the pension fund can achieve on its own.

 

If it goes ahead with these investments, Tennessee Cors will have an ownership stake in the regional mall assets held by Strategic Property Fund and in some of the hotels owned by Trumbull Property Fund.

 

Contracts have yet to be signed by the pension fund has received a report from its real estate consultant, The Townsend Group, recommending its clients invest in both of the commingled funds, and the pension fund now has to complete its due diligence on the two funds.

 

The projected dividend net of fees returns are 4.25% for Strategic Property Fund and 4% for Trumbull Property Fund.

 

UBS currently has a redemption queue to get into its $9.7bn commingled fund which could reach around $200m by this summer.

 

Strategic Property Fund has total gross assets of $14.8bn.

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