Allstate to double real estate allocation

Allstate Investments is planning to more than double its allocation to real estate equity investments over the next few years increasing its portfolio from $2 billion today to up to $5 billion in the near future.

Allstate’s head of real estate equity Edgar Alvarado told the September issue of PERE magazine the real estate arm of the US insurance group was already targeting several sectors in which to deploy fresh capital: low income housing tax credits (LIHTC) and fund managers in emerging markets.

Alvarado said there was currently a dearth of capital focused on the LIHTC sector, meaning investors could achieve IRRs of up to 17 percent in return for bond-like risks. The credits are used by developers to raise equity financing for projects and traditionally sold to taxable entities, such as banks, to help offset tax liabilities.

Edgar Alvarado

Allstate plans to invest $400 million in the sector over the next 12 to 18 months and could commit up to $1 billion of equity if conditions remain attractive.

The Northbrook, Illinois-based firm is also eyeing emerging markets, particularly Brazil, as it looks to grow and diversify its real estate portfolio from $2 billion, including unfunded commitments, today to between $4 billion and $5 billion in the next two to three years.

The firm has already invested in two Brazil-focused fund managers, with a third commitment expected shortly. Alvarado said Allstate wanted to take advantage of Brazil’s macro economic health, as well as the country’s demographic trends, and would in the future shift its focus to Asia for possible fund of funds investment, although he accepted the region presented “huge challenges” for LPs.

“Real estate today is about making sure you don’t put all your eggs in one basket,” Alvarado said.

To read more on Allstate’s plans to increase its exposure to real estate, see the September issue of PERE magazine out in digital format today. For more information on subscribing, click here.