Strong interest in real estate acquisitions has promoted Ohio Public Employees Retirement System to spend the remainder of 2007 working on the sale of $1bn in real estate assets.
The pension fund and its real estate consultant The Townsend Group feel the market is now right for the sale of the properties as both parties say there is “a tremendous of amount of capital chasing after just about every kind of real estate asset on the risk spectrum” from core to opportunistic.
Above average returns in real estate are now being driven by investors who are willing to accept lower cap rates rather than by higher income generated by occupancy and rent increases – keeping cap rates at historical low levels.
Officials at Ohio PERS said the sale of the properties should allow them to realize gains on the properties, sell off some non-strategic assets and reduce some exposure and risk in certain categories.
All of the properties now being sold are held within the pension fund’s separate account portfolio, including a mixture of apartments, office, industrial and hotels in selected markets across the United States.
At the same time as direct investments are being realised, Ohio PERS is continuing to invest capital in real estate funds, its latest commitment being $75m to Rothschild’s Five Arrows Realty Securities V, a commingled fund which makes “entity-level” investments in US public and private real estate companies.
By Jon Peterson – IPE Real Estate