By Mario Marroquin
The investment committee of the Tennessee Consolidated
Retirement System this week approved two real estate investments and the transfer of ownership of a multi-family asset in a
thriving suburb of Denver.
Following the recommendation of JP Rachmaninoff, director of
real estate at TCRS, and Matthew Haitas, senior portfolio manager, the
investment committee voted to allocate $150 million to Blackstone Real Estate
Partners X Fund and $100 million to EQT Exeter Industrial Value Fund IV.
Rachmaninoff and Haitas, who noted the allocation marks the
third investment in funds managed by Blackstone, said they expect a net internal
rate of return exceeding 13% from the EQT Exeter fund and 16% from Blackstone’s
real estate fund.
Haitas noted TCRS previously invested in two funds managed
by Exeter, which was later acquired by EQT in 2021.
Haitas also recommended TCRS seek a buyer for its position
in an apartment complex in Englewood, Colorado. TCRS invested $74.8 million towards
the acquisition of the Kent Place apartment complex in the Denver suburb in 2017
following the recommendation of Haitas, but the manager said the operating
performance was disappointing. Rent growth was slower than that of the average
in the Denver metro, he said, which, according to brokerage firm Colliers,
climbed by 11% on average on a year-over-year basis in Q1 2022.
The Kent Place complex consists of 300 units which are part
of an 11.5-acre mixed use development by Regency REIT and Continuum Partners that
opened in 2011. The site is anchored by a King Soopers grocery store, is near two
country clubs and is approximately 9.5 miles from downtown Denver.
Brokerage firm Colliers, citing figures sourced from CoStar,
said in its Q1 2022 multi-family report for Denver that the Englewood/Littleton
area saw a 14.8% year-over-year market rent growth in Q1. The brokerage
reported a vacancy rate of 5.3% for the submarket and said an estimated 468
units are under construction.
Colliers said 23,627 units are under construction in the
Denver metro area while the multi-family rental rates overall increased by
11.1% on a year-over-year basis.
TCRS, which manages $65.8 billion in assets, listed a target
allocation towards real estate of 10% and an expected 4.32% long-term real rate
of return for the asset class at the end of the system’s fiscal year ended in
June 2021.
The fund listed an estimated fair value of $5.1 billion in
investments in real estate at the end of FY 2021.