San Francisco Pension Fund Approves Search for New Real Estate Manager
Submitted June 10, 2010, 1:20 PM
San Francisco City and County Employees’ Retirement System has okayed the search for a new separate-account real estate manager to possibly oversee the investment of as much as $400 million in a fully discretionary role.
The pension fund is moving now at the urging of its real estate consultant, The Townsend Group. In a memorandum to the board, Townsend said the fund’s limited separate-account options put it at risk should a manager have significant personnel, organizational or performance issues or should San Francisco City and County have the need to allocate significant capital that would overweight the portfolio with a single manager.
Micolyn Yalonis, a Townsend principal in the company’s regional office in San Francisco, oversees the San Francisco pension account.
San Francisco now has existing separate-account relationships for real estate investment with RREEF, Dallas-based Invesco Real Estate and Trecap Partners, which has offices in San Francisco. However, only two of the accounts are active. New investments in the Trecap relationship have been placed on hold since the beginning of 2009 because the fund’s debt-investment strategy is not perceived as a good one in the current market cycle.
The search for a new separate-account manager will proceed through a request for qualifications. There is no guarantee that a manager will be hired and awarded an allocation or be transferred a portfolio of properties.
The general scope of work under the RFQ is to provide fully discretionary professional management of a portfolio of equity real estate investments totaling $100 million to $400 million. Managers would source, acquire and operate the portfolio. A discretionary account allows a real estate manager to make investment decisions without final approval from the pension fund. The responses to the RFQ are due July 16. The timeline for the rest of the search remains open including when a manager would be hired.
Townsend has come up with three minimum requirements for performance. A potential manager must have more than three separate accounts currently under management with public pension funds. None of these relationships can be non-discretionary accounts. Each firm must have demonstrated experience with a minimum of two separate accounts and/or commingled fund takeover assignments. The other request is to have demonstrated acquisition and disposition experience in office, industrial, apartments and retail properties.
San Francisco City and County has total plan assets in excess of $11 billion. The total amount invested in real estate is $1.07 billion. The pension fund has a targeted allocation for real estate of 12 percent. It has 52,119 members in the retirement plan with $732 million in retirement benefits paid out through June 30, 2009.
