By Jon Peterson
San Francisco-based Bristol Group Inc. has been awarded a $25 million commitment from the Tennessee Consolidated Retirement System for its Bristol Value Fund II, a value-add investment vehicle that in 2010 also drew a $25 million commitment from the San Francisco City and County Employees’ Retirement System.
The fund expects to invest in a multitude of office, retail and apartment properties nationwide. The strategies could involve development, redevelopment, repositioning and recapitalization. The total equity raise for the fund is projected to be from $165 million to $175 million. Investors in the commingled fund are projected to achieve a net internal rate of return of 14 percent to 18 percent.
It is the first time that Tennessee has hired Bristol to be part of its real estate investment program.
“We made this commitment as a way to obtain exposure to non-core real estate investments,” Michael Brakebill, chief investment officer of the Tennessee Treasury Department, said in an email message. “[The retirement system] is moving forward in this area to improve the overall return and risk characteristics of the pension fund.”
The Bristol Group chose not to comment for this story.
Previous to this commitment, Tennessee committed approximately 91 percent, or $1.1 billion, of its existing real estate portfolio to buying core properties on a direct basis with separate-account managers. “The pension fund has historically been authorized to invest 20 percent in value-add and opportunistic strategies. This authority has never been utilized,” Brakebill said.
Twenty percent of the Tennessee real estate portfolio equates to approximately $460 million, which could be invested in this strategy going forward.
The pension fund will consider all investment structures for its non-core dollars. This could be a combination of commingled funds or separate-account relationships. Its current separate-account managers are real estate investment manager Clarion Partners; J.P. Morgan Asset Management, a unit of JPMorgan Chase & Co.; private equity company TA Associates; Cornerstone Real Estate Advisers LLC; and RREEF LLC. Both its current managers and new managers will be considered to implement the strategy.
The pension fund’s real estate portfolio was valued at $1.2 billion as of March 31, or 3.5 percent of total plan assets. Its targeted real estate allocation is $2.3 billion, or 7 percent of its $35.2 billion in total plan assets.