A Pension Fund Turns Its Back on a Major Real Estate Investment

By Barbra Murray

In Florida, the West Palm Beach Police Pension Fund has opted to pull its approximately $21 million investment from JP Morgan’s JPMCB Special Situation Property Fund. The full redemption of the investment comes at the recommendation of investment consulting firm AndCo Consulting which, as noted in minutes from the pension fund’s July 11 Board of Trustees meeting, asserted that the fund has an unfavorable debt profile, recent underperformance that is expected to persist and a loan default on a large office asset. The firm accused the Fund of being unwilling to “share specific information related to the rationale on specific investments and the business strategy” and added that such behavior is “atypical for Core/Core-Plus managers.” Other pension funds have been retreating from their real estate investments, including the Maine Public Employees Retirement System, which recently announced that it would retrieve its $175 million investment from Mesa West Core Lending, a real estate debt fund managed by Mesa West Capital.

U.S. pension funds have long been a cornerstone of long-term investment in the real estate market, but it appears some are beginning to sour on the industry, at least for now. The real estate market is in a slump, with the lowering of valuations and the consequences of a frosty lending environment due to high interest rates and stringent borrowing guidelines. Particularly in the office sector, many landlords are defaulting on loans or choosing to return low-performing properties to the bank. Multifamily properties, which thrived in the pandemic days, have decreased in value. Pension funds hold the financial security of millions of U.S. workers in their hands, and if their withdrawal from real estate funds should become a trend, there could be some very big implications for the commercial real estate industry.

- Advertisement -

More Email Newsletters →