Montana commits to CBRE, TA Realty

The state investment board, which manages $12.78 billion in total assets, has agreed to invest in two value-added funds as it continues to raise its exposure to the real estate strategy.

The Montana Board of Investment has earmarked $20 million each to two value-added real estate funds, CBRE Global Investors’ CBRE Strategic Partners US Value 6 and TA Associates Realty’s Realty Associates Fund X.

As of June, CBRE Global Investors had collected $645 million in commitments for Value 6, which will convert undermanaged or distressed properties to core assets. The firm is seeking to raise $750 million in commitments for the fund, with a final close expected next month.

Meanwhile, TA Realty is targeting $1.25 billion for Fund X, which will invest in office, industrial, multifamily and retail assets across the US. Through September, the fund had amassed $1.1 billion in closed and committed capital and is anticipated to exceed its target by year-end.

The new commitments will further increase Montana’s allocation to value-added real estate. The state’s exposure to the risk strategy was 38.6 percent as of 30 June, up from 33.05 percent during the same period one year ago. By contrast, its exposure to core real estate declined from 31.26 percent to 28.65 percent, while its opportunistic exposure slipped from 25.61 percent to 21.47 percent during that same time period.

Core real estate, however, still makes up the largest portion of Montana’s actual real estate holdings, accounting for 41 percent of assets, as compared to 30.61 percent for value-added and 20.86 percent for opportunistic.

In a review of its real estate holdings last month, Montana said it was seeking to increase its value-add exposure in real estate “with a focus on traditional ‘bricks-and-sticks’ value creation strategies” that were executed by managers focusing on office, retail, industrial and multifamily properties. The investment board noted that value-added real estate represented “a significant market opportunity,” partly because of the large numbers of distressed properties in the US with poor capital structures that needed to be resolved with non-bank financing.

Montana’s commitments to the two funds follow two other value-added investments of $25 million to Stockbridge Capital Group’s Stockbridge Value Fund and $13 million to Alex. Brown Realty’s ABR Chesapeake Fund IV, both of which were made in June.