San Francisco Pension Board Allocates $50 million to AMB Fund
Submitted May 17, 2010, 9:20 PM
The San Francisco City and County Employees’ Retirement System has approved a $50 million allocation to the AMB U.S. Logistics Fund, upping its ownership position in the commingled investment account to 21 percent.
Prior to the board vote, the pension fund valued its existing investment in the AMB fund at $172 million through the end of 2009.
The board approved the new investment with AMB based on multiple factors, according to public record. AMB itself has invested $150 million in the fund, $100 million in January and an additional $50 million last month. Over the past 18 months, the industrial market also has experienced an unprecedented downturn. That decline is expected to produce investment opportunities this year and next. In addition, the board anticipates a recovery in demand for logistics facilities based on leading macro-economic indicators that show improvement in trade volumes, consumption and manufacturing.
Investors in the commingled fund are projected to achieve gross internal rates of return of 12 percent to 14 percent.
The fund, a value-added open-ended investment vehicle, owns industrial properties nationwide. Its assets had a fair market value of $2.4 billion at the end of last year, the most recent period available.
The logistics fund has significant exposure in the San Francisco Bay Area, with 6.8 percent of existing assets in the region. AMB Hillside Technology Park in San Francisco is one of the commingled fund’s top 10 investments. The property had a net asset value of $14.55 million representing 2.4 percent of the commingled fund’s total net asset value, according to a board report prepared by The Townsend Group, its real estate consultant. There appears to be room for additional Bay Area investments as well. AMB has stated that it wants 10 percent of the fund portfolio to be in the San Francisco area.
The San Francisco pension-fund board oversees $11.9 billion in total assets, $1.07 billion of which are real estate.
The pension board also has approved its annual real estate-investment plan for fiscal year 2010-2011. The pension fund intends to allocate capital to two sectors of its real-estate portfolio: up to $50 million for core, or low-risk, real estate investment through ownership of shares in public companies such as real estate investment trusts, and up to $350 million in non-core private real estate. The pension fund already has a 53 percent weighting in core private real-estate assets, so no additional capital will be set aside for this class of property over the next 12 months, according to a board report.
San Francisco City and County has seen its public REIT portfolio post a one-year return of 41.7 percent, reflecting the REIT market’s rebound. Over the coming year, the pension fund expects to watch the public markets to see if the stock values are sustainable. The pension fund will evaluate the market risk for the new capital in the second half of 2010.
The San Francisco City and County pension fund has 52,119 members and paid $732 million in annual benefits through June 30, 2009.
