UNITED STATES – Tennessee Consolidated Retirement System is boosting its real estate exposure by acquiring core assets through a separate account and by backing non-core real estate funds.
The pension fund has already put this strategy into action by allocating $55m to two real estate funds and acquiring a San Francisco office building for more than $100m.
The pension fund has allocated $25m to the Normandy Real Estate Fund III and £30m to the Covenant Capital Apartment Fund VII, both of which pursue non-core strategies.
Normandy Real Estate Partners focuses on repositioning and managing value-added assets in the Boston-Washington DC corridor, often acquiring them through a combination of debt and equity.
The fund manager is still investing capital from its Normandy Real Estate Fund II, which was established in 2007 through a $350m equity raise.
Covenant Capital Group held its final close for its value-added apartment fund, raising $236m from institutional investors and high-net-worth individuals.
The strategy is to invest exclusively in apartments in the Southeast and mid-Atlantic regions of the US.
Tennessee Consolidated also paid $106m for the 343 Sansome office building in downtown San Francisco through its separate account manager Clarion Partners.
The 260,000 sqft asset was acquired at a 5% yield, although Clarion Partners hopes to increase the income it generates through new lease agreements (existing rents in the property at 25% below market).
The pension fund is expected to make more investments in 2013, since it is still below its 7% target allocation. It's $1.7bn real estate portfolio represents 4.7% of the $36.4bn in total assets, according to most recent figures.