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Florida to commit $600m to noncore in 2014

The $176.96 billion pension plan is lining up sizable investments in non-core domestic and international funds this calendar year, including a $75 million pledge to Tristan Capital.

With a new 10 percent target for real estate, the Florida State Board of Administration (SBA) already has made significant headway toward reaching that goal. In calendar year 2014, the pension plan has designated a significant amount of capital to go towards non-core funds in the asset class.

“Our target in calendar year 2014 is putting as much as $600 million in non-core funds, both international and domestic,” Steve Spook, senior investment officer for real estate at Florida SBA, told PERE. However, “what has not changed in the real estate program is we’re still primarily a core-focused investor.”

SBA is targeting exposure of 80 percent core and 20 percent non-core – which includes both value-added and opportunistic investments – over the long term. It was unclear at press time how much the pension plan was allocating to core investments, which primarily are made through separate accounts, in 2014.

“That’s going to be less defined than non-core – we will determine that as core opportunities present themselves,” Spook said. “We have a better grasp on non-core because we have, among other things, this international initiative.” 

Indeed, approximately half of the $600 million for non-core is likely to be allocated to non-US-focused real estate funds, which are a new investment strategy for SBA. Last September, Spook said the pension plan was eyeing its first commitment to a dedicated international property fund and potentially could invest as much as $200 million in such vehicles during its fiscal year 2014, which began on July 1. SBA went on to make its debut international real estate investment in The Blackstone Group’s Blackstone Real Estate Partners Asia, with a $200 million commitment during the fourth quarter.

Since the start of the new year, the public institution has closed on a second international commitment, agreeing to invest the equivalent of $75 million in Tristan Capital Partners’ European Property Investors Special Opportunities 3. SBA also is in negotiations on another commitment to a Europe-focused vehicle for the equivalent of $100 million, and the pension plan is likely to approve a few additional investments in both Asian and European funds by the end of the year, although the exact dollar amount of those commitments has not yet been determined.

Meanwhile, SBA is closing on a commitment to a domestic real estate fund and is expected to begin negotiations on another domestic investment in the near future. Its most recent US real estate commitment was a $75 million pledge to Brookfield Asset Management’s Brookfield Fairfield US Multifamily Value Add Fund II during the fourth quarter.

Last December, SBA approved an increase of three percent to its real estate allocation target, from 7 percent to 10 percent over a five-year period. With the new target, the pension plan, which has nearly $177 billion in assets, would have one of the largest dollar allocations to the asset class among US pension plans.