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New Jersey pulls fund commitment

The $76.67 billion pension plan will not be investing in an Asia-focused real estate fund to which it committed capital last year because of “significant legal hurdles.”

The New Jersey Division of Investment (NJDOI) has terminated an agreement to commit $75 million to Global Logistic Partners’ GLP China Logistics Fund I.  The pension plan previously approved the investment in the Singapore-based industrial real estate developer’s first China-focused real estate fund at its board meeting in September. This is the first real estate commitment that NJDOI has withdrawn in at least three years.

In a notification to the New Jersey State Investment Council, which oversees the pension plan’s investments, NJDOI said that GLP and its prospective limited partners had a compressed timeframe to close the fund in early November. The pension plan said it was not able to close its investment in time for the fund’s final close.

“The Division worked diligently to meet the timeline and was ready and able to close; however, there were significant legal hurdles on both sides that could be overcome in time to close on the investment,” NJDOI said in the notification. “Therefore the Division will not be investing in the fund.” The pension plan said that the $75 million that had been designated for GLP would be re-allocate to future investment opportunities.

New Jersey is the latest public institution to cancel a real estate fund commitment. In the minutes from its December board meeting, the New Mexico State Investment Council (NMSIC) revealed that it had decided to pull its commitment to MetLife Real Estate Investors’ MetLife Core Property Fund after the endowment’s legal counsel and staff were unable to agree to a couple of contractual terms on the investment. The termination of the planned investment came after NMSIC decided to reduce its initial commitment to the fund from $100 million to $50 million.

In addition, last summer, the Texas Municipal Retirement System ended talks with Mesa West Capital over a contract to commit $100 million to the firm’s Mesa West Core Lending Fund. The two parties were said to have failed to agree on multiple aspects of their contract.

NJDOI did not indicate when or how it would re-invest the capital that had been designated for the GLP fund. However, the pension plan did approve a new real estate investment – a $140 million commitment to Wheelock Street Capital’s second commingled real estate fund, Wheelock Street Real Estate Fund II – at its board meeting yesterday.

NJDOI will make up 22.4 percent of the new fund, which has a hard cap of $625 million. On behalf of Fund II, Wheelock expects to continue to make opportunistic investments across the capital stack, with a focus on US hospitality, retail and residential land assets. NJDOI previously committed $100 million to Wheelock Street Real Estate Fund I in October 2011.

Additionally, the pension plan lowered its fiscal-year target allocation to real estate from 3.5 percent to 3.2 percent in equity-related real estate and 2 percent to 1.3 percent in debt-related real estate. One reason for the lowered target was NJDOI's sale of $925 million in real estate fund interests to NorthStar Realty Finance Corporation and Goldman Sachs Asset Management last year. Also, “given the lead time required to complete these investments, the previous target for the end of FY14 was no longer realistic,” the pension plan said in an email to PERE.

NJDOI had allocated 3.35 percent of its total assets to equity-related real estate and 0.99 percent to debt-related real estate as of January 27, down from 3.63 percent and 1.14 percent, respectively, in November. The decreases in the allocations were the result of both the secondary sale and realizations.