The Ohio Bureau of Worker’s Compensation (BWC) expects to commit at least $250 million to value-added real estate strategies over the next few years. This projection is in addition to a $50 million commitment that the pension recently made to Rockbridge Hospitality Fund IV, a value-added fund sponsored by RockBridge Capital.
According to BWC public information officer Elizabeth Seufer, the $24.66 billion pension projects that it will commit to more value-added commingled funds over the next several years in order reach its current value-added target of 1.5 percent of total assets by June 30, 2018. Currently, BWC only has 0.2 percent allocated to value-added real estate. Seufer noted that the target represents invested assets, and the strategy takes into account the usual three- to five-year period from the time capital is committed to the time it is fully invested.
The BWC has a 6 percent target for total real estate investments, including 4.5 percent for core strategies and 1.5 percent for value-added strategies. Currently, the pension has a total of 5 percent allocated to the asset class. Although a decision is yet to be made, investment staff is considering increasing the target allocation to real estate and presently is exploring ways this may be accomplished. Consultant RV Kuhns is performing an asset-liability modeling study on the portfolio, scheduled to be completed by June.
Meanwhile, the BWC investment staff approved a $50 million commitment to RockBridge Hospitality Fund IV at its March investment committee meeting. The vehicle is pursuing a similar strategy to previous funds in the series, making debt and equity investments in US hotels and capitalizing on the distress in the hospitality market. According to a filing with the US Securities and Exchange Commission, Fund IV, which is targeting $400 million, held a first close on $100 million in May 2013.
The RockBridge commitment marks BWC’s fourth value-added real estate investment to date. The pension made its debut commitments to non-core just last year, allocating $50 million each to KTR Capital Partners’ KTR Industrial Fund III, Latitude Management Real Estate Investors’ Latitude Management Real Estate Capital III and Hammes Company’s Hammes Partners II.