Investors - MAY 28, 2014

Connecticut commits $50m to value-added real estate, considers $100m more

by Reg Clodfelter

Connecticut State Treasurer Denise Nappier has green-lighted a commitment worth up to $50 million to Cypress Acquisition Partners Retail Fund, managed by Cypress Equities, on behalf of the $28.5 billion Connecticut Retirement Plans and Trust Funds, which comprises six state pension funds and nine state trust funds. Treasurer Nappier is considering an additional $100 million commitment to Lion Industrial Trust, an open-end fund sponsored by Clarion Partners.

CAPRF, Dallas-based Cypress Equities’ first fund, launched in March 2012 with a $300 million fundraising goal. The value-added fund is seeking gross returns of 17 percent by investing in retail properties with a specific focus on purchasing or developing shopping centers, power center retail, shopping malls and mixed-use properties in the United States.

“Our commitment with Cypress will increase the Real Estate Fund’s exposure to both value-add strategies and the retail sector, as it is a value-add retail fund pursuing a strategy of re-tenanting, repositioning and/or redeveloping retail properties across the country,” explains Lee Ann Palladino, chief investment officer for the CRPTF, regarding what set CAPRF apart from other potential funds.

The decision to commit up to $100 million to Lion Industrial will likely be made at the next Investment Advisory Council meeting on June 11. The open-end fund pursues a value-added strategy in the U.S. industrial sector.

“Both funds have specific, focused strategies, which is consistent with the type of strategy the REF is pursuing in our value-add sleeve,” Palladino adds.

The CRPTF’s Real Estate Fund has four sub-allocation targets: core real estate has a sub-allocation policy target of 50 percent (with a range of 40 percent to 60 percent), value-added real estate has a sub-allocation of 25 percent (with a range of 15 percent to 35 percent) and opportunistic real estate has a sub-allocation of 25 percent (with a range of 15 percent to 35 percent). Additionally, the REF has the option to invest in publicly traded portfolios as opportunities arise with a range of 0 percent to 20 percent.

Currently, the REF is underexposed to value added real estate, hence the focus on value-add strategy investments.

The REF in total comprises 5.2 percent of CRPTF’s entire portfolio, with a target of 7 percent and a range of 5 percent to 9 percent. It would take approximately $530 million of further investment in real estate to achieve the target. 

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