The New York State Common Retirement Fund committed $850 million to two real estate fund managers at its January and February meetings, according to its most recent transaction reports.
In February, NY Common committed $350 million to JP Morgan Strategic Property Fund, an open-ended real estate fund focused on core assets in major US markets. JP Morgan Asset Management invests the fund’s capital across asset classes. The fund, launched in March 1998, had a net asset value of $26.7 billion and a net return of 8.6 percent as of June 30, according to a presentation from JP Morgan. The firm had about half of the portfolio’s net asset value invested in office properties, with 24 percent in retail, 21 percent in residential and 7 percent in industrial real estate, as of June 30, according to the firm’s presentation.
There are 335 investors in the vehicle, with an average investment size of $80 million, as of June 30, according to JP Morgan. These investors include Dallas Police & Fire Pension System, which allocated $50 million to the vehicle in the second quarter of 2015; Kansas Public Employees Retirement System which invested a total of $155 million in 2013 and 2015; and the Los Angeles Department of Water and Power Employees’ Retirement Plan, which committed $50 million in October 2007, according to the pensions’ meeting materials.
NY Common also wrote a large check to another real estate firm in January, allocating $400 million to Brookfield Strategic Real Estate Partners (BSREP) II and $100 million to a co-investment vehicle, according to the pension’s transaction report. Brookfield Asset Management’s latest opportunistic fund invests in direct real estate and in real estate companies, distressed loans and securities. The $7 billion fund, which was launched last year, is the largest opportunistic real estate fund currently in the market, according to PERE Research & Analytics.
Other investors in BSREP II include the Pennsylvania Public School Employees’ Retirement System and Teacher Retirement System of Texas, which each allocated $200 million; South Carolina Retirement System, which committed $75 million; and State Universities Retirement System of Illinois (SURS), which invested $35 million, according to PERE Research & Analytics. Brookfield will commit $2 billion to the fund, according to SURS’ meeting materials.
Brookfield expects to close the fund in the fourth quarter of this year, according to SURS. The firm plans to make between 30 and 45 investments, committing $700 million of equity to six or seven deals and $50 million of equity to 20 to 40 deals. No more than 20 percent of the fund’s capital will be invested in any single deal, said SURS’ meeting materials.
About half of BSREP II’s capital will be deployed in the US, and Brookfield will not invest more than 20 percent of the fund outside of North America, Europe, Brazil and Australia, according to SURS. The fund has a net internal rate of return target of 16 percent and a 1.8x multiple. BSREP I, which was launched in 2012, had a net IRR of 20.9 percent as of June 30, 2014, according to SURS.
NY Common did not use placement agents for either of its latest commitments, according to its transaction reports.
The pension plan has been committing substantial amounts of capital to real estate funds as of late. In December, NY Common allocated $300 million to Jamestown Properties’ open-end real estate fund, Jamestown Premier Property Fund. The Atlanta, Georgia-based real estate investment firm launched the vehicle in October 2011. At the same time, the firm also made a follow-on commitment to its joint venture with MetLife Real Estate Investors, adding $455 million to MetLife Core Plus Partners, a 50/50 partnership that invests in US office, industrial, multifamily and retail properties. The pension fund previously invested $369 million of equity to the partnership.