The New York State Teachers Retirement System (NYSTRS) has selected Blackstone for a $500m (€460m) separate account real estate debt strategy.
Blackstone will target the US and UK for the mandate, with no limit on its investment in the latter.
The mandate is NYSTRS’s first separate account with Blackstone.
The pension fund said existing bank portfolios and banking regulations had limited UK banks’ appetite for mezzanine and transitional assets, creating an opportunity for non-bank lenders.
NYSTRS will have full investment discretion.
Targeted returns are a 7% gross IRR and 6% net IRR.
Blackstone will provide subordinate debt investments and first mortgage loans on a mixture of office, industrial, retail and multi-family assets.
No development projects will be considered.
NYSTRS’s previous commitments, worth more than $860m, were through funds.
It made a $75m allocation to Blackstone Real Estate Debt Strategies II in 2013 and a €147.6m commitment to Blackstone Real Estate Equity Partners Europe V in 2014.
NYSTRS has renewed CMBS portfolio contracts with BlackRock Financial Management and Torchlight Investors.
The fund’s relationship with the former began in 2001 and, as of year-end, was worth $497.8m.
The pension fund’s relationship with Torchlight Investors, formed in 2001, is worth $423.4m.