UNITED STATES - Some pension funds in the United States are showing evidence of preferring to invest in industrial properties through commingled funds, rather than direct.
Oregon Public Employees Retirement Fund has just invested $100m (€68.3m) into the KTR Industrial Fund II while New York State Teachers' Retirement System is now making a $50m commitment to the US Industrial REIT II fund.
"We think that it's very difficult to build up any sizeable industrial portfolio by acquiring properties directly," said Brad Child, senior investment officer for real estate for Oregon PERF.
"These assets are typically in the range of $20m to $40m. It's hard to get a portfolio of a decent size quickly. It makes more sense to invest in a commingled fund. And the added benefit is that the portfolio could then be packaged for a sale at a premium price as part of an exit strategy," continued Child.
Oregon PERF is expecting to achieve a 16-18% gross IRR, having previously made a $100m commitment to the KTR industrial fund I and seen a return of 30.5% to investors through its assets of 107 buildings in 39 separate transactions.
This time KTR Capital Partners is hoping to achieve a total equity raising of $750m and carry leverage of up to 65% on investments within the fund.
The bulk of assets are likely to be in variety of North American locations, split as 30% South, 30% East, 20% West, 15% Midwest USA along with of 5% combined in Mexico and Canada. A mixture of existing properties with value-added features will be bought for the fund, alongside new development projects but no more than 25% can be placed in spec building transactions.
In contrast, USAA Real Estate Company recently raised $450m for its US Industrial REIT II through 10 institutional investors, including NYSTRS, so the total capitalization of $1.1bn in assets will purchase distribution buildings in both primary and secondary markets of Los Angeles, Louisville, Dallas, Atlanta, Fresno and Nashville, among others, to generate a net 12.5%-14% IRR over a five-year investment period.