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New Jersey backs Och-Ziff

At the New Jersey Division of Investment’s March 19 meeting, the $76.5 billion pension plan committed $100 million to Och-Ziff Real Estate Fund III and gave an update on its massive secondaries sale to NorthStar and Goldman Sachs.

The New Jersey Division of Investment (NJ DOI) has approved a follow-on commitment to manager Och-Ziff Capital Management, committing $100 million to the Och-Ziff Real Estate (OZRE) Fund III at its March 19 meeting.

NJ DOI’s existing partnership with Och-Ziff, which was presented to the council in August 2012, consists of a $1.1 billion commitment across various separate account mandates that invest in private and public assets.

Documents from the $76.5 billion pension plan noted that a commitment to OZRE III will provide diversification to NJ DOI’s real estate portfolio and provide exposure to non-traditional assets. OZRE III, which is targeting $1 billion in equity, is expected to invest in a 50/50 split between traditional real estate assets (multifamily, office, hotel and retail) and non-traditional real estate assets (including gaming, distressed land and residential, cell towers, parking, golf, debt and senior housing).

In its reasons for committing to the fund, NJ DOI noted that it has witnessed the collaboration between the Och-Ziff real estate team first hand while reviewing opportunities through its due diligence efforts in the various active separate account vehicles. The pension also looked favorably upon the fact that partners of Och-Ziff have been major investors in its funds, representing more than $250 million of the total capital commitments in OZRE I and OZRE II.

Documents from the meeting also included an update on the pension plan’s $925 million real estate secondaries sale. In June, NJ DOI revealed that New Jersey would be selling its secondaries assets to a partnership between NorthStar Realty Finance, NorthStar Real Estate Income Trust and funds managed by Goldman Sachs Asset Management. NorthStar Realty Finance, a publicly-traded commercial real estate investment and asset management company, holds a 70 percent stake in the partnership, with its non-traded REIT affiliate and GSAM each holding 15 percent stakes. In July, the investment division unveiled the names of the fund interests to be sold, including 25 fund investments made through 16 different managers from December 2005 through March 2009. 

NJ DOI reported that 100 percent of the funds in the transaction have closed as of February 28, 2014. The update also noted that only 24 of the 25 fund interests were sold to the NorthStar partnership. The division’s interest in MacFarlane Urban Real Estate Fund II was purchased by MacFarlane Partners pursuant to a Right of First Refusal provision in the fund documentation that required any potential transaction to first be offered to the investors of the fund. The purchaser paid the price allocated by NorthStar, $9.2 million, in full, with no deferral.