Tennessee Consolidated shuffles separate account managers for real estate

NORTH AMERICA – The Tennessee Consolidated Retirement System has made some changes to its separate account real estate manager line-up after completing its manager search.

The pension fund decided to keep five of its seven existing managers – Clarion Partners, JP Morgan Asset Management, Deutsche Asset & Wealth Management, Cornerstone Real Estate Advisers and TA Associates.

The investor added two new managers – L&B Realty Advisors and BlackRock Realty Advisors.

Tennessee decided not to bring back two managers, UBS Realty Investors and Capri Capital Partners. 

The pension fund said the managers ran a portfolio valued at $46.8m (€34.1m), assets that will be transferred to other managers in future.

All of the firms selected will now have the ability to represent Tennessee in the purchase of core properties in the US. 

The capital is open to the managers on a case-by-case basis. 

There is no specific allocation dedicated to any one specific manager.

The investment strategy calls for managers to buy low-risk real estate on an unleveraged basis. 

These for the most part will be a mixture of office, industrial, retail and apartments. 

Non-traditional property types such as student housing will also be considered.

Tennessee said its real estate portfolio could increase to $2.4bn by the end of the fiscal year, or 30 June 2014. 

For this to happen, the pension fund would have to invest approximately $600m in the asset class between now and then.

It said its investments were likely to be made in separate accounts and non-core commingled funds.

Tennessee has completed two separate account investments in the latter part of 2013. 

It paid $61.9m to buy the 183-unit Retreat at Tucson in Tucson, Arizona, a student housing property located near the University of Arizona. 

The property was acquired through Clarion Partners.

The pension fund also bought the 378-unit Arvada Station apartments in Denver for $78.3m. 

This deal was closed by TA Associates.

The pension fund has a real estate portfolio valued at $1.84bn, as of the end of September. 

This amounts to 4.8% of its $38.7bn in total plan assets. 

The long-term target for real estate is 10%.