REAL ESTATE - The $13.6bn Los Angeles Fire & Police Pension System has approved an investment in a commingled fund and signed off on some emerging manager guidelines.
The pension fund has committed to invest $25m into the ABR Chesapeake Fund III. This is a commingled fund that is managed by Alex Brown Realty Inc.
The pension fund is expected to achieve a net IRR of 12% to 14%. The fund manager has previously raised capital for five other commingled funds with a similar investment strategy. The returns on these funds are projected to be a 14% net IRR.
Los Angeles Fire & Police thinks that the manager has a good track record with its previous funds. The latest commingled fund is the first time that the manager has attempted to raise capital from pension funds.
The pension fund likes that the commingled fund looks at some specialized property types. Two examples of this are hotels and student housing. These property types are attracting less capital than are the core property types of office, industrial, retail and apartments.
ABR Chesapeake Fund III is a value-added fund. Its investment strategy includes development, redevelopment, rehabilitation, enhanced management, repositioning and financial restructuring.
Alex Brown Realty is hoping for a total equity raise of $250m. The maximum portfolio leverage allowed for the fund is 65%. Most of the transactions for the fund will be in the neighbourhood of $5m to $20m.