NORTH AMERICA - The Los Angeles County Employees Retirement Association (LACERA) has approved a $100m (€76m) commitment to the CityView Bay Area Fund II.
David Kushner, chief investment officer, wrote in a board meeting document that the commitment represented a niche investment that would complement LACERA's existing real estate portfolio by increasing diversification and creating projects that could be retained as long-term core assets.
LACERA will have the option of acquiring a 100% interest in the completed assets of Fund II.
The pension scheme said the fund could become a build-to-core strategy to assemble a high-quality portfolio of apartments suitable for retention as long-term core holdings.
LACERA believes that, in the current investment environment, it has been priced out of the market for quality core apartment assets.
It said this was generally due to the fact there was "a lot of capital chasing these assets", which has increased their prices and lowered cap rates.
Fund II has an investment strategy to identify, develop and finance a mixture of new construction and redevelopment of multi-family rental housing in the San Francisco Bay Area.
These could be either apartments or mixed-use projects with an apartment and commercial combination.
LACERA will be the sole investor in Fund II.
The pension fund will achieve a 99% interest in the fund for its equity contribution.
Los Angeles-based CityView will be the manager of the fund, co-investing 1% of the capital contributions to the fund.
Fund II is targeting a net return to LACERA in the range of 13% to 15%.
Distributions will be subject to a 9% preferred return to investors followed by an incentive-based promoted interest of 20% to CityView.
The investment fund has a 10-year term, with a three-year investment period.
In other news, the Wisconsin State Investment Board has decided to terminate RREEF as a global REITs manager.
As of July of this year, the pension fund had placed a value on the portfolio of $236.3m.
Wisconsin and RREEF had first established the relationship in September of 2007 with a $200m allocation.
The pension fund said in an email that the returns on the portfolio were 8.2% year to date, -6.8% for one year, 16% for three years and -5.2% since inception.
The capital in the portfolio was transferred into two other asset classes on a non-permanent basis.
Approximately $80m of the capital was moved into two internal liquidity portfolios at $40m each; the other $156.3m was placed in cash.
Wisconsin said the long-term plan was to re-invest the capital from the former RREEF portfolio into other real estate strategies.
The pension fund said it had not yet determined which strategies it will be pursuing.
Wisconsin has a total real estate portfolio valued at $4.6bn, through the end of July.
It does have one existing global REIT manager, European Investors, which runs a portfolio valued at $251m for the pension fund.
