Investors - OCTOBER 21, 2014

Arizona commits $250m to real estate, energy

by Reg Clodfelter

The Arizona State Retirement System has committed $100 million to real estate, $100 million to energy and another $50 million to energy-related real estate, according to recently released board documents. The $34.6 billion retirement system adopted an updated pacing and implementation plan in December 2013 that called for $500 million in new commitments in 2014 including $350 million allocated to niche and tactical opportunities.

The Blackstone Group received two commitments, with $100 million going to Blackstone Property Partners and $75 million going to Blackstone Energy Partners II. As an open-end core-plus fund, Blackstone Property Partners is an unusual offering for the typically opportunistic manager. The recently launched fund is reportedly seeking around $5 billion to achieve 9–11 percent returns from office, retail, multifamily and industrial properties in major markets in North America.

BEP II is an energy and natural resources vehicle that will reportedly be larger than its predecessor, which closed in September 2012 after raising $2.5 billion. BEP I, which also received a commitment from ASRS, targets control and control-oriented equity investments within the energy and natural resources sectors globally.

Apollo Global Management also received a $25 million co-investment to invest in the acquisition of “certain energy assets from Encana Corporation,” according to board documents. Apollo’s Jupiter Resources, a portfolio of funds managed by affiliates of Apollo, acquired Encana’s Bighorn assets in the Alberta Deep Basin for approximately $1.8 billion in June.

The related Energy Housing Fund also received $50 million from the retirement system to invest in residential properties in areas of energy development and tight housing conditions with a primary focus on multifamily assets. The investment is part of ASRS’ niche and tactical investment program.

ASRS is also conducting due diligence on Red Mill Capital, a retail owner/operator, as the retirement system considers entering into a programmatic joint venture targeting retail with the firm. Due diligence is also being conducted on a co-investment with CIM Group on a condo conversion and retail project in lower Manhattan.

As of June 30, 2014, ASRS had 5.9 percent of its assets invested in real estate, just short of its 6.0 percent target to the asset class.


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