By Jon Peterson
Alameda County Employees Retirement Association Board has adopted staff’s recommendation to make a $50 million commitment into the MetLife Core Property Fund. This real estate investment is subject to the completion of legal due diligence and contract negotiations.
The pension fund discussed this investment opportunity at its November 20th investment committee meeting. In attendance at this meeting was the investor’s real estate consultant, Cleveland-based The Townsend Group. The consultant indicated in the board meeting minutes that its recommendation to invest in the fund was solidified owing to the favorable negotiation of terms. This included the reduction in the lock up period to two years from three years and a fee break below 50 basis points for Townsend clients.
The Core Property Fund is an open-ended commingled fund managed by MetLife Real Estate Investors. The real estate manager has its headquarters in Morristown, New Jersey, and a regional office in San Francisco. It declined comment when contacted for this story. The lockup period means that an investor can not file a redemption to exit the fund until the time period has been reached.
The fee break refers to the asset management fee that is typically 100 basis points for most core open-ended commingled funds, according to sources familiar with these kinds of investment funds.
MetLife has seeded the Core Property Fund with 23 properties from its general account, according to a document from another un-named institutional investor. One of these properties is located in the San Francisco Bay Area. This is the 242,498 square foot Paragon Point office building in Redwood City. This property is one of five office assets in the fund totaling 1.8 million square feet. The other buildings are in Denver, Chicago, Miami and Austin.
There are a total of 11 industrial properties in the fund totaling 2.1 million square feet. All of these assets are in Southern California in markets including Los Angeles, Anaheim, Fullerton and San Diego. There are a total of seven apartments in the fund totaling 2,300 units. The only California property is the 481-unit Main Street Village complex in Irvine. The other properties are in Dallas, Houston, Miami, Tampa, Charlotte and Chicago.
The seeded assets in the Core Property Fund represent over $1 billion in gross asset value. MetLife will be investing at least 20 percent of the initial equity in the fund as a co-investment. The real estate manager will be buying more assets for the commingled fund in the future. San Francisco figures to be one of its targeted markets.
ACERA had planned not to be making any new real estate commitments until 2014. “There was some capital that came available to us based on the strong performance of the overall investment portfolio of the pension fund,” says Betty Tse, chief investment officer for the pension fund.
ACERA’s total fund was ranked #1, #4 and #4 for its one-year, five-year and ten-year annualized total returns, respectively, amongst the 20 members of the 1937 ACT county funds in California, according to the RV Kuhns report titled “SACRS Public Fund Universe Analysis” for the period ending June 30, 2013.
The pension fund now has a real estate portfolio estimated at $350 million, as of the end of October. This portfolio makes up 5.5 percent of its estimated $6.5 billion of total plan assets.