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Connecticut eyes Europe, Cypress commitment

The $28.5 billion pension system is considering a $50 million investment in Cypress Equities Real Estate Investment Management’s debut fund, as well as more investments in European real estate.

The Connecticut Retirement Plans and Trust Funds (CRPTF) is considering a commitment to the debut fund of Cypress Equities Real Estate Investment Management. The $28.5 billion pension system presented a $50 million commitment to Cypress Acquisition Partners Retail Fund at its April meeting, and the commitment currently is under consideration.
 
In October, PERE reported that Cypress had raised more than $250 million for the fund, nearing its $300 million equity target. The Dallas-based firm had gathered $195.56 million for the fund’s first close in May 2013, according to a filing with the Securities and Exchange Commission. The vehicle, launched in late 2012, is anticipated to reach its hard cap of $400 million. 
 
The vehicle, which is targeting a 17 percent gross return, will focus on the acquisition of multi-tenant retail properties including power centers, lifestyle centers and grocery- and drugstore-anchored strip centers in the US. The fund’s value-added approach will be focused on repositioning existing space to better suit retail tenants’ changing demands, as well as re-tenanting properties. 
 
Meanwhile, CRPTF also plans to expand its exposure to international real estate with a focus on European investments, according to statements from the Connecticut State Treasurer’s office. The state’s real estate fund (REF) has a target exposure of 20 percent to investments outside the domestic US but, as of Q3 2013, it had a 15.1 percent exposure to international real estate investments. The pension plan hopes to make up this difference through investments in opportunistic Europe-focused commingled funds over the next year to three years. Given the REF’s current $1.484 billion size, the pension would need to invest approximately $72 million to the strategy in order to reach its target.
 
“Many of our opportunistic managers are taking advantage of the lower asset pricing levels and ongoing distressed credit in European markets against a slow but improving economic backdrop,” the Treasurer’s office stated in an email to PERE. “Investments in Europe today will not be unlike investing in US markets back in 2009 and 2010—a combination of factors including an improving economy and banks willing to sell distressed assets in their portfolio, along with a higher regulatory environment in the banking industry, is attracting investment capital to the Continent at this time.”
 
CRPTF’s previous investments in European real estate include a $50 million commitment to The Blackstone Group’s Blackstone Real Estate Partners Europe III in 2008 and a $50 million commitment to Marathon Asset Management’s European Credit Opportunity Fund in 2012.