OCTOBER 3, 2012

USAA Real Estate aims to raise $2 billion for government fund

by Andrea Waitrovich

USAA Real Estate Co.,  a subsidiary of USAA, a financial services company serving military families with $138 billion of assets under management, has launched the U.S. Government Building Open-End Fund, a core strategy fund. It is a conversion fund from a closed-end to an open-end vehicle. As a closed-end fund, equity commitments were made primarily from domestic investors with a total of $490 million. With an open-end fund structure, the fund aims to attract international investors as well. The vehicle has a $2 billion fundraising goal. The near-term equity fundraising target is $450 million to $500 million and could include as much as $400 million from non-U.S. investors.  

The U.S. Government Building Open-End Fund focuses on well-located institutional office properties that are at least 80 percent leased to U.S. federal government or local government entities.

“[An] advantage for the fund is it is a seeded fund, which gives access to higher quality assets,” says Sam Mitts, executive managing director of portfolio management at USAA Real Estate Co. “Another advantage is the long-term leases with high-credit, AAA tenants, which provide a stable cash flow. The fund is a defense fund. It will [still] perform [well] during a downturn due to the long-term tenants.”

Recently, the fund purchased a 771,000-square-foot office property in Charlotte, N.C., where the Federal Bureau of Investigation signed a 15-year lease. A sales price or seller was not disclosed.

USAA Real Estate Co. owns and manages more than $5 billion of institutional quality real estate for pension plan sponsors, insurance companies and international investors. Its portfolio comprises more than 70 million square feet of commercial office and mixed-use property, modern federal and state government office facilities, warehouse distribution buildings, multifamily properties, community shopping centers, regional malls, and hotel and resort properties located in major metropolitan markets across the United States.

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