UNITED STATES- California Public Employees Retirement System has agreed to invest $490m ($361.7m euros) into three separate real estate strategies.
This is a follow on investment for CalPERS of $190m into the Hines European Development Fund II, having already committed $101m to the initial Hines European Development Fund.
Robert Eberhardt, a portfolio manager for CalPERS, said: "We have been watching the western European office market for the past four years through the two commingled funds. Our commitment to the first fund was in 2003. We think that many of the major Western Europe markets have a big demand for new and modern office buildings. This is what the second commingled fund will provide," he added.
CalPERS is not the only pension fund investor in European Development Fund II as other investors to have contributed capital include TIAA-CREF, the pension fund of General Motors and ABP.
Around 80% of the transactions for European Development Fund II will be involved in the development of office buildings while the other 20% will be with residential projects.
An initial project for the €650m commingled fund has been found in Barcelona and key target markets the fund is looking at include France, Italy, Germany, Spain and the UK.
Its manager, Hines, is making a co-investment of 15% of the total equity raised.
The projected net IRR yield for the eight-year fund is 15% to 18% to investors while the fund has a four-year investment period.
Equity for the commingled fund will be used to secure a line of credit with a European bank to cover 30% of the construction cost for each project. The remaining 70% will be financed by a construction loan.
CalPERS has also approved an allocation of $200m into a partnership with Adelante Partners, to invest in public securities, called Sun King One.
This venture is the first time that the pension fund and manager have done business together but the pension fund is expecting to achieve a net IRR of at least 10% while Adelante Partners has agreed to commitment 1% of the total equity as a co-investment.
Investment will be allocated to public securities in the United States, including both public REITs and real estate operating companies, and benchmarked for the partnership is the Wilshire Real Estate Securities Index.
Jane Delfendahl, an investment officer on the real estate staff for CalPERS, said, "We think there are some good investment opportunities with this strategy. We are concerned about REITs being fully valued and all that capital that is taking public companies private. This is why we created a long-short strategy for the partnership."
At the same time, CalPERS has also made a $100m commitment into the Principal Mortgage Value Investors commingled fund, managed by Principal Real Estate Investors.
The pension fund expects to achieve a net IRR of 12% and the fund has a mezzanine debt investment strategy.
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