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Contra Costa commits $150m to distressed funds

The $5.95 billion county pension system will make two new commitments, allocating $80 million to Siguler Guff and $70 million to Oaktree.

The Contra Costa County Employees Retirement Association (CCCERA) has approved two commitments to follow-up distressed real estate funds, allocating $80 million to Siguler Guff’s Distressed Real Estate Opportunities Fund (DREOF) II and $70 million to Oaktree Capital Management’s Real Estate Opportunities Fund (ROF) VI.

Siguler Guff’s DREOF II has an equity target of $600 million to $750 million and is aiming for a first close tomorrow, or when the fund has received $150 million in commitments. In December 2011, CCCERA invested $75 million in the firm’s first distressed real estate fund, DREOF I. Both Siguler Guff vehicles are fund of funds with approximately 40 percent allocated to co-investments. 

DREOF I is fully committed at $630 million and two-thirds has been drawn for investments in North America and Europe. Siguler Guff expects DREOF II will be more European-focused than its predecessor. As of July, DREOF II had 14 new investment opportunities and eight co-investment opportunities in the pipeline. 

Oaktree’s ROF VI began fundraising in the summer of 2012 and has closed on $653 million in committed capital as of March. The firm expects ROF VI will have its final close on or before September 20 with close to $2 billion in commitments, with a hard cap of $2.5 billion. So far, ROF VI has spent $430 million on 22 investments and plans to invest in commercial and residential properties, bank portfolios, structured finance, international transactions and corporate real estate. In December 2011, CCCERA invested $50 million to Oaktree’s previous real estate fund, ROF V, which raised $1.3 billion in equity. 

In board documents, CCCERA cited each vehicle’s ability to deploy capital quickly, as well as ROF VI’s attractive investments and DREOF II’s lucrative European opportunities as reasons for committing to the funds. 

The two commitments align with CCCERA’s new real estate program, approved by the board on May 8. The $5.95 billion county pension system has a target real estate allocation of 12.5 percent, or $744 million, including a $528 million private real estate target. To reach that target, the board recommended an additional $241 million in value-added, opportunistic and distressed funds to its current $419 million allocation. Documents from CCCERA did not specify a timeframe for the increase in private real estate, which aims to reduce the pension plan’s exposure to REITs.