The Commonwealth of Massachusetts Pension Reserves Investment Management Board is seeking a $600 million credit facility to fund its $1.6 billion real estate portfolio. "We are looking for a $600 million unsecured facility that we will draw down over the next 12 to 18 months," said George Wilson, senior investment officer at the fund, regarding its plans. Wilson explained that the pension fund is looking to lever up its purchasing plans in the real estate market while it can benefit from low borrowing costs. The board has been in discussions with different lenders, declining to name specific candidates.
Wilson said the fund is open to different structures on the loan, including a maturity of up to 10 years as its purchasing plans have a 10-year horizon. He said so far some potential players are willing to put up the entire piece while others are willing to commit to a portion and want to syndicate the remainder. The fund has never used debt before to fund purchases and therefore does not have an existing lender. Wilson said price will determine which bank makes the final cut. He declined to name his tartget price.
The fund is looking to tap the debt markets in the next 90 days and Wilson explained that if the credit markets shift and the bond market offers better spreads, the fund would consider a bond offering in lieu of the bank deal. But as of now it is planning on bank debt. The loan proceeds are expected to be invested into additional core properties, resulting in an overall leverage ratio of approximately 30% for the portfolio. He said the fund invests in office, retail, residential, and industrial properties with values of at least $50 million.