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Illinois Municipal allocates €125m to European core funds

The $34.7bn pension system returned to three previous fund managers in its latest round of real estate commitments.

The Illinois Municipal Retirement Fund is betting €125 million on European core real estate in its latest round of commitments.

IMRF, which managed $34.7 billion as of June 30, wrote three checks to fund managers with which it had previously invested, the pension fund said Friday. In the spring, the pension fund opened a request for proposals seeking managers of European open-ended core private real estate commingled funds. The pension said it would commit at least $100 million total to such vehicles after the June 10 submission deadline.

Last week, the pension fund earmarked €50 million to CBRE Global Investors’ Pan European Core Fund, according to a statement from the pension system. The Los Angeles-based firm began investing capital from the open-ended core fund in April 2010 with the purchase of a 32,000 square foot, class A London office building for £31.7 million, according to local media reports at the time. IMRF has invested in four other CBRE funds, according to PERE research.

The pension system also allocated €50 million to Invesco European Fund, Atlanta-based Invesco Real Estate’s European fund. IMRF previously committed $55 million in Invesco’s 2006-vintage core US real estate fund, according to PERE research.

Finally, IMRF wrote a €25 million check to Cornerstone Real Estate Advisers for Cornerstone European Fund. IMRF had previously allocated $25.1 million to Cornerstone Real Estate Fund VIII, a 2011-vintage fund that invested in North America value-added properties across asset type, according to PERE research.

Cornerstone is seeking to raise €1 billion for its European open-ended fund, through which it will target a diversified range of assets, PERE previously reported. In April, the firm held a €175 million first close for the vehicle, its first fund in the region. Cornerstone’s parent company, Massachusetts Mutual Life Company, provided the initial €175 million commitment. After expanding its business in Europe last year, the Connecticut-based fund manager began marketing the fund in January.

The firm is targeting returns between 7 percent and 9 percent, according to an investor presentation. Cornerstone plans to buy assets for €30 million to €70 million with a focus on the office, retail and logistics sectors. The seed portfolio for the fund comprised four buildings purchased from November to April in the UK, Sweden, Germany and France for €198.5 million. Out of this portfolio, the most recent acquisition was the April purchase of Klopperhaus (pictured), a German office property in Hamburg purchased for €43.9 million. The seven-story building is 87 percent leased with ground floor retail.

In July, IMRF likewise allocated to three real estate managers with which it had invested previously. The fund returned to invest with AEW Global, writing a $50 million check to AEW Partners VIII, and went back to CBRE GI, allocating $35 million to CBRE Strategic Partners US Value VIII. Finally, IMRF made a follow-on investment to an emerging manager for its third July real estate commitment, investing $30 million with Long Wharf Real Estate Partners V.

IMRF’s $1.9 billion in real estate investments have recently outperformed the pension fund’s overall portfolio. In the year ending June 30, the pension plan’s real estate portfolio generated an 11.8 percent return, compared with a negative 0.9 percent return for the entire portfolio, according to its most recent performance report.