By Jon Peterson
The Oregon Public Employees Retirement Fund has approved a $350 million allocation to a new investment strategy with a separate account with Denver-based Ascentris to invest in long-term mixed-use projects. A potential landing place for this capital would be across markets along the West Coast, according to information provided by the pension fund.
The name of the partnership is Ascentris-OR Cherry Creek West LLC. Anthony Breault, senior real estate investment office for the Oregon State Treasury, which makes investment recommendations for the pension fund said, “Our interest in the property type is [that] we have no mixed-use assets currently in our real estate portfolio, and this capital will enable use to fill up that hole.”
Ascentris did not respond to an email seeking comment for this story. Oregon PERF will hold investment discretion over this relationship, so the pension fund will need to approve any transaction that is considered for the relationship.
The investment strategy will be to invest capital on a long-term basis into large and very complex projects where the asset would be created over a six- to eight-year period and developed over three to four phases. The overall objective is to create assets that are in infill locations that have barriers to entry for competing development, close proximity to mass transit and strong demographics.
“The potential mix of the projects would be multifamily, office and supportive retail where the synergies of the project make the value for the whole, when combined under one ownership, is more than the individual pieces,” said Breault.
Oregon PERF is initially considering residential projects for this investment with a smaller focus on office and amenity retail, for now. “The office [component] is anticipated to grow for later phases, since the precise tenant demands needs are now in question, and this is not an opportune time to develop office. The fate of office still needs to be resolved with better visibility to demand and space utilization over the long term,” said Breault.
The development component of most of the projects in the partnership with Ascentris will seek IRR net returns in the mid to upper teens, according to Oregon PERF. Upon completing developments, the pension fund plans to convert the stabilized assets into its core portfolio for a long-term hold. This would, based on today’s underwriting, create an upper single-digit return with a levered 45 percent loan-to-value target.