NJ Pension sets annual pacing target for real estate investments

  • AUM: $76.1 bln
  • RE Allocation: 6.8 pct
  • RE Target: 7.2 pct
  • Contact: William Skaggs, william.skaggs@treas.nj.gov

New Jersey State Investment Council plans to commit between $225 million to $300 million in real estate investments this year, according to notes from its March meeting.

The system is following this pacing model to achieve its target allocation of 7.25 percent. The system’s current allocation as of September was 6.83 percent, pension documents said.

This year, the portfolio will scale back on opportunistic real estate exposure to limit volatility and add demographically-driven strategies as a complement to property-type exposure like multifamily and medical office investments, the documents said.

The system also will focus on investments with meaningful current yield as a portion of their return and consider increased focus on higher growth geographies like the Western and Southwestern U.S., the documents said.

Bolstering its real estate pace, New Jersey’s Division of Investment committed $100 million to Exeter Property Group’s Industrial Fund III to reach its annual pacing target.

New Jersey said it chose Exeter because of its strong track record. Fund I is fully realized, generating 22.3 percent net internal rate of return and 1.5x multiple as of March, according to New Jersey documents. Fund II is set to hit a 15.5 percent net IRR, New Jersey said. The firm also has a stable management team, with most senior managers having worked together prior to the formation of Exeter in 2006.

New Jersey also completed a secondary sale of Lubert-Adler Real Estate Fund VI-B, selling a $12.7 million stake, on the advice of consultant Hamilton Lane, on Feb. 1, 2019. The Division committed $100 million to the opportunistic real estate fund in 2011.

Lubert-Adler’s sixth fund had a net IRR of 20.3 percent, a net multiple of 1.80x and a DPI of 159 percent, according to documents from the system.

It’s unclear who bought New Jersey’s stake in the fund. The sale was conducted through an auction where pricing was 94 percent of NAV, according to pension documents.