Products April 1, 2014

Real Estate Specialist Launches Fund for Institutional Investors

April 1, 2014 (PLANSPONSOR.com) - CenterSquare Investment Management, Inc. has launched the CenterSquare Value-Added Fund III, L.P.
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The fund will invest in middle-market, transitional real estate assets in the U.S., focusing on the office, multifamily, retail, industrial, parking and hospitality sectors.

Scott Maguire, global head of client service and marketing at CenterSquare in Philadelphia, tells PLANSPONSOR the key benefit of real estate investments for defined benefit retirement plan sponsors is diversification. Real estate investments have a low correlation with other traditional investments. They historically have an attractive risk-adjusted performance—with a volatility profiled materially lower than that of the broad equity markets, Maguire says.

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For plan sponsors looking for inflation protections, real estate investments offer an opportunity to increase cash flow based on the duration of leases—hotels offer a short-term of one day. This allows plan sponsors to tailor asset protection against inflation, Maguire says. “Real estate is an asset class with a wide dispersion of characteristics with different lease rolls,” he notes.

The CenterSquare Value-Added Fund III, which is limited to qualified purchasers, is expected to raise $500 million, with the first closing date anticipated in the second quarter of 2014 and the final closing date anticipated in the second quarter of 2015. CenterSquare said the fund plans to acquire properties with total capitalizations ranging from $25 million to $75 million.

The fund will implement a value-added strategy, focusing on acquiring and improving assets that require physical upgrades or revisions in their capital structures.  “We believe that a middle market, value-add real estate strategy represents the most attractive space in the market for creating value and reducing risk,” said P.J. Yeatman, head of private real estate for CenterSquare.  “Fund III will be an acquirer of transition and a seller of stability.”

According to Maguire, right now in the U.S., institutional investors have an average of 7.5% invested in real estate, lower than the average target of 8.4%.

CenterSquare is the suburban Philadelphia, Pennsylvania-based real estate specialist for BNY Mellon. More about the fund is here.

Ask the Experts April 1, 2014

(b)lines Ask the Experts – Differences in RMDs for 403(b) Plans

April 1, 2014 (PLANSPONSOR (b)lines) – “I have traditionally worked with 401(k) plans, but my new employer sponsors a 403(b) plan.
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“I am currently working on my first required minimum distribution (RMD) transaction with a 403(b). I am familiar with the 401(k) rules, but are there any differences for 403(b) plans?” 

Michael A. Webb, vice president, Retirement Practice, Cammack Retirement Group, answers: 

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Excellent question! Indeed there are some significant differences, mainly due to the fact that the 403(b) rules for RMDs essentially follow the IRA requirements, as opposed to 401(k) and other qualified plan rules, with some modifications. The key differences between 401(k) plan RMDs and the requirements for 403(b) plans are as follows:

1.      As is the case with IRAs, if a participant maintains more than one 403(b) account, he/she can total the RMDs from all 403(b) plans, yet withdraw the required minimum amount from only one 403(b) plan. In a 401(k) or other qualified plan, separate distributions are required from each plan. Note however, that accounts for which a participant is a beneficiary cannot be combined with accounts that the participant owned directly.

2.      In a rule that is unique to 403(b) plans, 12/31/86 balances are grandfathered from the present RMD rules and instead have their own separate rules that generally delay required distribution until the later of age 75 or April 1 following the year of retirement (see “(b)lines Ask the Experts- Required Minimum Distributions” for more details on this rule).

However ROTH 403(b) distribution rules follow the qualified plan rules with respect to timing (later of April 1 following the attainment of age 70 ½ or retirement) rather than the Roth IRA rules (where distributions are NOT required until after the death of the account owner). Also, unlike an IRA, a spouse cannot treat an inherited 403(b) contract as it were his/her own contract.

Thanks again for your question!

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
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