REAL ESTATE - The Virginia Retirement System has approved investments in three new commingled funds. The total amount invested is $410m.
It made two commitments to core commingled funds. One of these was a $175m commitment to the Strategy Property Fund. This is an open-ended commingled fund managed by JP Morgan Asset Management. It has a net asset value of $11.1bn, through the end of June.
Virginia projects that its commitment will be funded into the commingled fund over a one- to two-year period. This is going to happen as the real estate manager has a Que for new investors going into the commingled fund. This occurs as a result of having too much capital in the fund at one time and not enough deals in the marketplace. This is happening with many of the top performing core open-ended commingled fund managers in the United States.
The Strategic Property Fund mostly invests in office buildings, industrial properties, shopping centers and apartments. It looks for properties that are established and fully leased in major metropolitan markets across the country.
Virginia made a $175m commitment to the Prime Property Fund. It expects this capital to be invested into the commingled fund right away.
This is a core commingled fund advised by Morgan Stanley. It has a current net asset value of $3.5bn. The investment fund mostly places capital into the main property types of office, industrial, retail and apartments. It does consider some other property types as well. In 2005, the real estate manager completed a $400m deal involving self-storage assets.
The other real estate commitment was a $60m investment in the Capmark Structured Real Estate Partners commingled fund. This entity is managed by Capmark Investments, L.P. This is a fund that invests in real estate through structured finance deals. These can be mezzanine debt kind of positions.
The total equity raise for Structured Real Estate Partners is around $1 billion. Anticipated returns for the investors are a net IRR of 14% to 16%. Most of the transactions for the fund will be with office, industrial, retail and apartments.
Virginia does not have a specific targeted allocation for real estate. It has a policy that allows for real estate in its portfolio up to 7%. The pension fund has now invested 5.3% of its total assets in real estate. It will continue to invest in the asset class if it sees investment opportunities in the marketplace that it likes. Virginia has total assets of $50.6bn.