The Wyoming State Loan and Investment Board (SLIB) will make a $150 million commitment from their increased non-core real estate allocation to Northwood Investor’s evergreen fund, Northwood Real Estate Partners (Series IV).
SLIB, which oversees $11 billion in permanent funds, expanded its overall real estate allocation by approximately 4.5 percent in 2010. The state investment policy now includes a target distribution of 7.5 percent to the asset class — 4 percent for core real estate and 3.5 percent for non-core. Consultant RV Kuhns and Associates advised that Wyoming use this increase to invest approximately $250 million in additional non-core investments over the next few years, starting with the Northwood commitment.
Wyoming’s non-core real estate portfolio currently includes four other funds—Heitman Value Partners II, TA Associates Real Estate Fund VIII, Cornerstone Core Mortgage Fund and WestRiver Real Estate Finance Fund. These investments totaled approximately $96 million as of December 2012.
SLIB approved the consultant’s recommendation at its August 8 meeting. Board documents listed Northwood’s track record, broad leadership, alignment of interest, investment discipline, prudent use of leverage and use of operating platforms as reasons for committing to the fund.
New York-based Northwood runs a unique ‘evergreen’ vehicle, where the firm is allowed to add capital to the fund once each calendar year. First launched in August 2007, the fund is now on its fourth round of capital-raising. The 76 investors currently invested in the fund include the endowments of Yale University, Duke University, the University of Chicago, Stanford University and Northwestern University, as well as Makena Capital Management.
Northwood intends to generate a gross internal rate of return of 15 percent to 20 percent and a 2.0x gross equity multiple using a geographic strategy focused on major metropolitan areas in the United States and super-regional markets in Europe. The fund will seek to acquire diversified value-added properties including retail, office, multifamily, hospitality and industrial assets.
According to board documents, the fund plans to invest in: “assets where a significant portion of the value will be generated by growing cash flow at the underlying property; assets that can be acquired at a discount through portfolio acquisitions or other methods; and assets where the opportunity exists to add value through redevelopment or additional development rights.” Northwood predicts Series IV will close on or before October 1, and the investment period is scheduled to close by May 31, 2018.
The fund’s most recent acquisition is a 400,000-square-foot building at 100 Broadway in New York. Though financial terms for the off-market transaction have not been disclosed, Northwood is rumored to have purchased the 24-story building from a joint venture between Meadow Partners, the Canada Pension Plan Investment Board, Madison Capital and LoanCore Capital Partners for $150 million, according to data provider Real Capital Analytics.
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