Santa Barbara diverts REIT funds to Blackstone

The Santa Barbara County Employees’ Retirement System is liquidating its $20 million separate account with Harrison Street Real Estate Capital and re-committing the capital to Blackstone’s core-plus platform, the pension system said at its meeting last week.

A spokeswoman for SBCERS did not provide a reason for the liquidation, referring questions to its real estate consultant, ORG Portfolio Management. The Cleveland, Ohio-based consultancy could not be reached for comment.

In its latest round of commitments, SBCERS earmarked $20 million to Blackstone Property Partners, the New York-based firm’s core-plus platform. BPP had $14.1 billion of committed capital and a 13 percent net internal rate of return as of March 31, according to Blackstone’s first-quarter earnings.

SBCERS also has $7.5 million invested in Blackstone’s seventh opportunistic fund, a $14 billion vehicle that returned 18 percent as of March 31.

This was not SBCERS’ first change to its Harrison Street account: in April, the pension system took $5 million out of its account for unspecified reasons, according to board documents. The pension system created the account in 2011 to invest in real estate investment trusts. The separate account was worth $29.3 million and returned 9.5 percent in the year ending December 31. SBCERS also has $10 million invested with Harrison Street’s core property fund.

In other recent real estate commitments, SBCERS wrote a $10 million check to Chicago-based Walton Street Capital’s latest opportunistic fund, Walton Street Real Estate Fund VIII. The pension system invested the same amount with the firm’s seventh fund, a 2012-vintage vehicle that generated a 16.5 percent net IRR as of December 31, according to board documents.

SBCERS also earmarked $5 million to Miller Global Fund VIII, a value-added, US-focused fund from Denver-based Miller Global Properties. The pension system invested $7.5 million in the predecessor vehicle, a 2012-vintage fund, which had a 15.8 percent net IRR as of December 31.

Overall, SBCERS had $233 million invested in private real estate as of December 31. The real estate portfolio generated an 8 percent net IRR and a 1.4x multiple as of year-end 2016.