FROM: Don Pierce, Chief Investment Officer
SUBJECT: Informational: 2021 Real Estate Pacing Plan Update
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2021 Real Estate Pacing Plan Update.
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BACKGROUND:
In January 2021, the Board approved a budget of $110 million for Real Estate investments. The objective of the budgeting process is to set a pace for deployment to implement the Board approved asset allocation targets. The budget is adjusted each year based on actual commitments, performance, and contributions/distributions of the existing investments. The 2021 recommendation reserved half of the budget for each Core and Non-Core Real Estate investments. At the time of the recommendation, there were no pre-identified Real Estate investments for 2021. As a result, the budget reserved equal amounts, $55 million, for each Core and Non-Core. We are bringing this update to notify the Board that commitments have exceeded the amount reserved for Non-Core Real Estate but remain within the overall budgeted amount.
Core Real Estate is defined in Investment Policy No. 020 Real Estate Investment Objectives, Policies and Procedures as assets that include equity or debt in existing, substantially leased income-producing properties located principally in metropolitan areas that exhibit reasonable economic diversification. There is a portfolio leverage limit of 50% for Core strategies. It also includes public real estate securities. Non-Core Real Estate includes equity or debt in those properties and/or investment strategies that require specialized acquisition and management expertise or skill to mitigate the business and leasing risk associated with an individual investment. Pursuant to this policy, staff reviews Real Estate opportunities and monitors market conditions to inform recommendations and implementation above or below the target asset allocation.
Year to date, SBCERA has made commitments to three Real Estate opportunities. The first two commitments were made during ...
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