Tom Honeycutt, a USAA spokesman, tells GlobeSt.com that the sizeof Cobalt's capital pool hasn't been set and he declined to give anestimate. The firm also is ironing out its investment criteria. Thefirm's strategy includes managing properties it owns andestablishing partnerships and venture arrangements with companiesin local markets.

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Cobalt intends to operate in top-tier markets around thecountry. Honeycutt listed Dallas, Atlanta, Seattle, New York Cityand San Francisco as likely places where Cobalt would dobusiness.

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The firm has no current holdings, "but we expect to change thatshortly," Honeycutt says.Friedland, before forming Cobalt, was COOfor American Industrial Properties. He also was the REIT's chiefinvestment officer until its sale last year. From 1997 to 2001, hedirected the growth of its portfolio from $70 million to $650million in assets. "It's a great opportunity for us to bringsomeone of his expertise into us, but leave the flexibility of himbeing the developer and architect of the private equity firmstructure," Honeycutt says.

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USAA Real Estate has more than $2.7 billion in assets undermanagement. Its portfolio includes office, industrial and hotelproperties and it invests in real estate operating companies. Itsparent company is USAA, an insurance and financial services companybased in San Antonio.

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