By Lauren Bailey
Amid signs showing long-term real estate operating fundamentals are strengthening, the Sacramento County Employees’ Retirement System has made two new real estate commitments totaling $80M, during the quarter ending March 31, 2025.
During its latest investment board meeting, the pension fund disclosed a commitment of $50M to FPA Multifamily’s Core Plus Fund VI, which targets premium multifamily properties in leading metropolitan markets in the U.S. It also invested an additional $30M in FPA’s Apartment Opportunity Fund IX, which specializes in multifamily properties within the secondary and tertiary U.S. markets.
While commercial real estate transaction volume has declined since 2022 and many institutional investors are seeking exits, the meeting materials noted that apartment and industrial sectors are experiencing elevated supply levels that are forecasted to moderate due to increased development costs, construction labor shortages, and tightening of lending.
It said oversupply and tariff implications may have hindered short-term fundamentals in the multifamily rental apartments, but over the medium-term the sector’s outlook remains healthy. “Capital markets remain soft, but most property sectors [are] poised for growth,” noted the materials.
As of March. 31, 2025, SCERS’ actual invested real estate allocation was 6.7%, which is below its revised target allocation of 8.0%. Its real estate portfolio generated a return of 1.4% for the quarter, above the benchmark (0.9%). While its one- (0.3% vs 1.5%) and three- (-4.9% vs -4.7%) returns fell below their benchmarks, it outperformed its five-year (3.3%) benchmark (2.4%).
For the quarter, the pension plan’s core portfolio returned 1.3%, surpassing its benchmark (0.9%). It also out performed its one- (1.3%), three-(-4.9%) and five-year (4.1%) benchmarks (1.2%, -5.1%, and 2.0%, respectively).
The pension fund’s opportunistic portfolio didn’t fare as well, falling below the benchmarks for the quarter (-0.6% vs 1.1%), as well as over one- (-9.7% vs 2.2%), three- (-13.1% vs -4.1%) and five-year (-7.8% vs 3.0%) periods.
During the meeting, SCERS also announced it was extending contracts with its real estate consultant Townsend.
