The Montana Board of Investments has made its first real estate investments of 2013 with commitments two commingled value-added fund managers totaling $55 million. At its November 19 meeting, the board earmarked $25 million to DRA Advisors’ DRA Growth and Income Fund VIII and $30 million to Equus Capital Partners’ BPG Investment Partnership IX.
DRA held a first close on Fund VIII in late October, bringing in $446.5 million in commitments. The New York-based investment manager has followed a consistent strategy for its eight value-added vehicles, investing in markets or properties that are perceived as out of favor by other investors and enhancing value through aggressive leasing and operational plans to grow NOI, according to the firm’s website. Other investors in the fund include the Teacher Retirement System of Texas, the Fire and Police Retirement and Health Care Fund of San Antonio and the Ann Arbor Retirement System.
Meanwhile, Philadelphia-based Equus, formerly BPG Properties, raised $105.3 million for Fund IX with its first close in September 2011, including a $15 million commitment from the Pennsylvania State Employees’ Retirement System. Most recently, the fund held an interim close on $157 million in April. The vehicle, which will employ leverage of 60 percent to 65 percent, is targeting $250 million in commitments and a net internal rate of return between 12 percent and 14 percent.
The Montana Board of Investments represents nine state retirement plans, including the Public Employees Retirement System. The board invests in real estate on behalf of all nine funds through the Montana Real Estate Pool, which consists of commercial real estate and timberland. Of the $829 million that the pension system had allocated to real estate as of September, 32 percent was devoted to value-added investments, while opportunistic investments made up 19 percent and core investments accounted for 41 percent. At the meeting, the board also approved a change in the pension system’s real estate allocation, increasing the required range to between 6 percent and 10 percent from between 4 percent and 10 percent.
The DRA and Equus commitments are the first real estate investments that Montana has made since November 2012, when the pension system earmarked $20 million each to CBRE Global Investors’ CBRE Strategic Partners US Value 6 and TA Associates Realty’s Realty Associates Fund X.