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North Carolina to invest $750 million in real estate

The $74.5 billion pension system has earmarked a significant amount of capital to new real estate commitments for 2013, primarily through re-ups with existing managers.

North Carolina Retirement Systems plans to begin making $750 million in new commitments to real estate early next year, with most of the capital going to follow-on investments with existing managers. The commitments are expected to take the form of both commingled funds and separate accounts and most likely will be focused on value-added strategies, where the state pension system currently is underweighted.

The new commitments were identified as one of the areas of investment focus for 2012/2013 in North Carolina’s real estate update, which was released last week. Other areas of focus include the redistribution of core real estate capital, although such a reallocation “would only occur if there was an exceptional separate account platform with a competitive advantage to our current core investments,” a spokeswoman explained in an email to PERE.

In addition, North Carolina is exploring the sale of certain real estate assets in order to capitalise on investments where business plans have been executed or value has been created and also will consider additional real estate debt investments. The pension system’s current debt investments are managed by Mesa West Capital, Crossharbor Capital Partners, Brookfield Asset Management, Westport Capital Partners, Lone Star FundsUBS and LEM Capital.

Furthermore, North Carolina will continue to monitor real estate opportunities in Europe, a region where the pension system has not made any recent investments with dedicated real estate funds.

Real estate currently represents 7.6 percent of North Carolina’s total assets, which is below its policy target of 8 percent and legislative cap of 10 percent. Within real estate, the pension system is 41.4 percent allocated to core, which is above its 40 percent target; 22 percent allocated to value-added strategies, which is below its 30 percent target; and 36.5 percent allocated to opportunistic real estate, which is above its 30 percent target. The state's largest real estate managers by market value as of 30 September include Rockwood Capital, The Blackstone GroupStarwood Capital Group and DRA Advisors.