UNITED STATES - Pension funds have found activity in the buying and selling of real estate is slowing considerably in the United States, as a result of the downturn in prices and sentiment in the property markets.
Massachusetts Pension Reserves Investment Management Board is one pension fund yet to close on any new transactions through for the first half of 2008, even though it had allocated up to $300m (€189.9m) at the beginning of the year for separate account acquisitions for 2008.
The value-added part of the strategy called for $100m to invested in this sector - a deal to be done through RREEF and which now sees the manager looking at a possible office building purchase in Miami.
The other $100-200m was to be invested in the purchase of core real estate through JPMorgan Asset Management, TA Associates, Invesco Real Estate and LaSalle Investment Management.
JPMorgan is now in due diligence on a potential apartment deal in New York City.
More importantly, Mass PRIM decided earlier this year it wanted to sell seven assets over the next 12 months but so far only two assets have been sold, the most recent of which was the $87.3m sale of a 296-unit known as the Mesa Verde Villas complex in Costa Mesa, California.
Net proceeds of this sale to Mass PRIM were $71.7m, giving the pension fund an IRR of 18.2% on this deal, thanks to the support of its separate manager Invesco who purchased the property in a joint venture with Sares Regis.
Mass PRIM has now decided to proceeding very slowly on the five other assets targeted for a sale because of the ongoing dislocation and the uncertainty in the capital and real estate markets.
As a result, officials are being very selective in the bidders they deal with and where pricing should be on the assets.
Mass PRIM had a total real estate portfolio valued at $5.5bn, as of the end of April, equating to approximately 10.52% of the pension plan's $52bn in assets.