NORTH AMERICA – The Alameda County Employees' Retirement Association (ACERA) has decided to shift capital out of Prudential Real Estate Separate Account II into Prudential Real Estate Separate Account III.
John Badeer, investment analyst for ACERA, wrote in an email that the pension fund took the action due to PRISA II's performance and the current makeup of the portfolio in the commingled fund.
ACERA had made two separate commitments to PRISA II.
The first $20m (€15.3m) allocation was approved in 2004, and an additional $21.9m was placed into the fund in 2007.
The total value of these investments was pegged at $36.5m as of the end of 2012.
ACERA has considered PRISA II to be a value-add investment. In an email, however, Badeer argued that core assets made up approximately 78% of fund's total assets at year-end 2012.
Real estate consultant the Townsend Group advised the pension fund to move the capital into a commingled fund with a larger value-add component.
PRISA III, managed by Pramerica Real Estate Investors (which goes by the name of Prudential Real Estate Investors in the US), has a value-add target of 60% of its portfolio.
The fund had a portfolio valued at $2.1bn, as of the end of 2012.
The targeted gross IRRs before fees have been paid for PRISA III is 11-15%.
ACERA has a real estate portfolio valued at $300m, as at the end of last year.
In other news, the San Diego City Employees' Retirement System has approved a $20m commitment into the Mesa West Real Estate Income Fund III.
The investment strategy for the fund is to originate and service first mortgage loans on middle market, value-added and transitional commercial real estate assets in the US.
Mesa West Capital is seeking a total equity raise in the fund of $2bn.
A final close on Fund III is projected for the second quarter.
The targeted return for investors is a 12% net leveraged IRR.
The fund will provide floating rate debt with interest rates of 5-7%, while the loan to value on the transactions will be 65-70%.
San Diego City's commitment will represent 50% of the pension fund's investment plan to invest in value-add real estate for 2013.
