US roundup: Kern County, Universities of Illinois, Townsend
NORTH AMERICA – The Kern County Employees Retirement Association has decided to end a separate account with LaSalle Investment Management for domestic and global REITs and re-invest the capital with three core, open-ended, commingled fund managers.
The pension fund has approved commitments of $60m (€45m) to the Invesco Real Estate Value Fund III and $45m each to the ASB Capital Management Allegiance Real Estate fund and JP Morgan Strategic Property fund.
The value of the separate account for REITs with LaSalle is $158m.
Anne Holdren, executive director with Kern County Employees, said: "We felt we would achieve better overall diversification by having our capital invested in three core open-ended fund managers than with one REIT manager."
The managers hired were brought before the pension fund board based on the recommendation of investment consultant Wurts & Associates.
At least one of these commitments will not be placed into the fund right away.
The Strategic Property fund has a current entry queue of $1.5bn-1.7bn.
This would mean new the manager would likely not call commitments issued to the commingled fund for 12 months.
This scenario could be altered if JP Morgan is able to close on a $600m-700m office building purchase in New York now in process.
These new commitments approved by Kern County will put its real estate portfolio right at its 5% targeted allocation for the asset class.
Its existing real estate portfolio includes the REIT relationship with LaSalle and the office building in which the pension fund's administration offices are located.
In other news, the State Universities Retirement System of Illinois has approved a $100m commitment to the Dune Real Estate Fund III, an opportunistic fund.
Daniel Allen, CIO at the pension fund, said: "We look at this investment as a follow-on commitment. We made a $40m commitment to Dune Real Estate Fund II in 2008. We have been very satisfied with their investment performance from the earlier fund."
Illinois State Universities is expecting to achieve a net IRR in the range of 15% to 17%.
Dune Capital Management is still raising capital for the commingled fund.
The real estate manager has a target of $850m for a total equity raise.
It will be investing capital in a multitude of property types.
Most of the investing will occur in the US, with some on a global basis.
Illinois State Universities will be looking to invest additional capital into real estate during its 2014 fiscal year, which starts 1 July.
The amount of capital planned for this time period is $100m; this will be discussed by the pension fund at its September board meeting.
Lastly, the Townsend Group is now focusing its European investment efforts primarily on Germany, with a secondary focus on France, according to its View of the World report written by Principal Terry Ahern.
It said Townsend views these areas as large markets with positive economic growth and a "deeper opportunity set".
The company wants to be in the two countries to avoid or mitigate euro conversion risk and access the deeper, more liquid prime markets that show growth potential.
Townsend is also researching a possible entry into the warehouse and logistics space.
Ahern wrote in the document that appraisal pricing of cap rates of 7.8% and asset quality/location in the open-end funds may provide an attractive entry point.