The Pennsylvania Public School Employees’ Retirement System (PSERS) has announced its decision to allocate an additional $200 million to its real estate portfolio; $100 million will go to the AG Core Plus Realty Fund IV, which targets a return of 14-15 percent before fees.
From IP Real Estate:
The plan made two new $100m commitments to the AG Core Plus Realty Fund IV and the pension fund’s in-house co-investment and secondary real estate programme.
Pennsylvania is the second US public pension fund to approve a new commitment to Realty Fund IV, following the Illinois State Board of Investment, which made a $30m allocation.
Courtland Partners, the real estate consultant for Pennsylvania, said Angelo Gordon & Co would continue its core-plus strategy of acquiring equity interests in high-quality assets likely to appreciate over time.
The fund will target underperforming office, retail, apartment and industrial assets, with an emphasis on the Top 15 US markets, shunning development projects.
Most assets will be in the US, although the fund can invest as much as 25% outside North America.
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Targeted gross returns for the fund are 14-15%, with the current income component of the return projected to be 7-8%.
The fund will have a leverage component of 55-65%.
Pennsylvania has now committed a total of $200m to in-house co-investments and its secondary investment strategy.
The capital can be invested via co-investments on specific transactions with other funds, as well as by buying out other limited partners from existing positions in funds.
PSERS is also exiting the Prologis North American Industrial Fund, a fund of logistics and distribution facilities in the U.S.
PSERS committed $200 million to that fund in 2006, but the investment is now thought to be worth $167 million.