UNITED STATES - Pension funds in the United States are moving some capital into investing in value-added apartments, as renter demand for flats is believed to be on the upswing.
Los Angeles Fire and Police Pension System has committed an undisclosed sum to Concierge Asset Management's I fund in part because the change in the debt markets has also affected cap rates on some value-added apartment deals, according to Mike Oliver, executive director of business development for Concierge.
"For the kinds of apartment complexes that we buy, we have seen a 50 basis point increase [on the cap rates] from earlier this year. The main reason for this is that the highly-leveraged buying has been affected by the change in the debt markets."
The Concierge Fund I is expected to raise a total of $111m (€77m), around 90% which will come from a single major institutional investor while the remaining $7.8m is funded by pension funds or endowments, to buy B and C-quality apartments in the Sun Belt region of the United States - asset which tended to be built in the 1980s and have seen no capital injection for several years.
At the same time, Los Angeles Fire & Police has approved a commitment of up to $50million into the Urdang Value-Added Fund II, which seeks out properties with management inefficiencies, recapitalization potential or the opportunity to increase tenancy.