The Alaska Retirement Management Board (ARMB) has voted to terminate its 11-year separate account with real estate investment manager Cornerstone Real Estate Advisers, due in part to changes in the portfolio management team at the firm.
According to documents from the $25.5 billion pension system, a “proposed portfolio manager change by Cornerstone caused staff to reflect on ARMB’s separate account structure and consider improvements.” ARMB also noted that it would prefer to consolidate its real estate separate account assets with fewer managers.
ARMB hired Cornerstone in 2003 with a $100 million mandate to make new core investments and acquire value-added assets that had improved to core status. The pension subsequently increased the allocation to $175 million, but Cornerstone’s current portfolio is valued at just $123.3 million and contains two assets: a $76.4 million office building in Glendale, California purchased in 2003 and a $45.3 million apartment property in Stamford, Connecticut purchased in September 2013, according to ARMB documents.
ARMB made note of the limited number of properties in the portfolio as another reason for terminating the manager, adding that the “growth in the Cornerstone portfolio has never materialized as initially conceived” in part because Cornerstone only had invested in large assets. ARMB stated that staff believes “now is a good time to optimize ARMB’s core separate account portfolio and focus this strategy with three managers instead of four.”
With the termination of Cornerstone, ARMB’s separate accounts portfolio will consist of UBS Global Asset Management, LaSalle Investment Management and Sentinel Real Estate. The Cornerstone apartment asset will be transferred to the Sentinel portfolio and the office asset will be transferred to UBS, while the remaining $54.3 million allocation to Cornerstone will be transferred to LaSalle’s account.
Following the transfers, ARMB’s UBS portfolio will consist of 12 assets totaling $383.9 million with a $41.4 million commitment remaining, LaSalle’s will consist of four assets totaling $184.1 million with a $139.9 million commitment remaining and Sentinel’s will consist of four assets totaling $202.1 million with a $2.2 million commitment remaining.