The Houston Firefighters' Relief and Retirement Fund plans to invest in alternatives and real estate again, after a two-year hiatus.
Officials of the $2.21 billion fund have been sitting on the sidelines since 2003 because of high real estate prices, and they've cut alternative investing by half. But the fund's board has decided to step up the pace of its alternative investment commitments, planning to commit between $80 million and $100 million this year.
One of the fund's last alternative investments was an unusual financing arrangement that will allow Houston's Proton Therapy Center to open next spring. The center, at M.D. Anderson Cancer Center, was partially financed by a $32 million private equity fund sponsored by investment banker Sanders Morris Harris Group Inc., Houston, in December 2002, said Christopher Gonzales, chief investment officer of the firefighters fund. The funding came from the pension plan's alternative investment allocation, which is currently 13% of assets.
Fund officials also committed $26.5 million to the debt portion of the financing through a construction loan that turns into a mortgage loan. Funding for that investment came from the fund's 5.5% real estate allocation, Mr. Gonzales said. The construction loan, which has an 8.5% yield, is scheduled for repayment in April 2006. "It's a private equity real estate investment that looks the same as a direct real estate holding," he said.
"It's a great opportunity that we can invest and get a return, and it's an investment in Houston," said Rhonda Smith, deputy director of the pension fund.