AMERICAS NEWS: New Jersey returns to real estate

It has been almost three years since New Jersey’s $70 billion pension made its last investment in private real estate. Last month, however, the state’s division of investment waded back into the property waters, committing $100 million to a Lubert-Adler Real Estate co-investment fund.

Yet unlike many of its peers, who are re-upping with existing managers, New Jersey Division of Investment has not only made a substantial commitment to a new manager but also to a fund that will invest alongside an existing opportunistic vehicle.

Lubert-Adler Fund VI-B is a $400 million co-investment vehicle being raised by the Philadelphia-based firm to invest alongside its $2 billion opportunistic Fund VI, which closed in 2007. The fund will not charge management fees until at least June 2013, according to New Jersey pension fund documents, and is not expected to invest more than 40 percent of the equity of each transaction made alongside Fund VI and another existing co-investment fund, Fund VI-A.

What makes Fund VI-B somewhat unusual, though, is the fact it is in no way a recap vehicle and is actually barred from investing in any legacy deals within Fund VI. Instead, sources familiar with the matter said the vehicle was being raised to give Lubert-Adler additional firepower to source distressed US debt and equity deals. With Fund VI still not fully invested, the firm was unable to raise a new commingled fund. However, existing LPs were happy for additional equity to be brought alongside their fund.

For New Jersey, the fund – which will run through the end of 2016, mirroring Fund VI – marks the start of what could be its major re-emergence in the asset class. The pension plan is looking to increase its allocation to alternatives by 10 percent to 38 percent, with the real estate target allocation expected to rise 2 percent to 9 percent.