Large pension funds work in similar fashion to the Federal government; they are very deliberate and very slow to act. Many pension fund charters begin with the words “preservation of capital”. They have their own agenda and few can move this one inch to the left or right.
In other words, they’re just not that into you. The buffers and intermediaries are deep and wide. If you are in search of a two million dollar multifamily loan and your mortgage banker says they have a pension interested, it’s probably from a micro-loan pool (from the pension investors perspective). In fact, many pension fund investors continue to place real estate in the “alternative” asset class.
Here are a few websites related to sovereign and pension real estate investing:
Pension Real Estate Association (prea.org) My all-time favorite real estate research bastion.
Investor & Pension Real Estate A high quality data source for U.S. and European real estate investors.
Preqin.com Preqin provides services and investment research about alternative asset classes.
Large U.S. based pensions have over one trillion dollars in assets with approximately eight percent of these funds in real estate based assets. These real estate assets include, for example:
- Direct ownership
- Joint Ventures
- Fund investments
- Fund-of-Funds investments
- Mortgage investments
- International real estate funds
Direct investments often have nine digits or multi-year commitments. They seldom have an interest in “new” relationships.
For mortgage investments, the bar can be much lower- as low as $5,000,000. Yet, this is the exception to the rule. Your mortgage banker is the best person to inquire about loan minimums from a pension investor.
Pensions like to stay in highly developed markets with densely populated cities. The best markets for a pension include gateway cities- cities that provide significant commerce and have highly developed transportation systems from air, rail and waterways.
From a pension investor perspective, a secondary city is one that has some of the attributes of gateway cities. So while most of us think in terms of secondary markets like Nashville and Oklahoma City, pensions look at Houston and Denver as secondary markets; places with large populations and good transport hubs (Houston with its airport and sea access, Denver with its airport and transit hubs).
When looking at pensions for investment dollars and/or mortgage financing, just recognize that most of us rate well below their radar screen. If you want access, engage those that are already at the table with them. For those with a strong constitution wanting to go direct, first- seek an invitation, then take a number. And recognize that their timeline and your timeline are set by two different clocks.
This article is intended to be informational only and does not provide legal, financial or accounting advice. See http://multifamilyinsight.com. Multifamily Insight.