UNITED STATES - Kansas Public Employees Retirement System has expanded its real estate strategy into senior housing by making a $35m (€24.6m) commitment to AEW Senior Housing Investors LP.
Pension fund officials said they like the market demographics of senior housing in the United States as an investment prospect, as the growing senior baby boomer population is creating a need for more senior housing, and this segment of the population is still being active with plenty of capital to afford better senior housing living.
AEW Capital Management has many years of experience of investing in the senior housing sector albeit much of this was done through a separate account relationship with California Public Employees Retirement System (CalPERS).
The total equity raising for its latest senior housing offering is targeted to be $500m and is expected to deliver 15% gross IRR or 10-12% net IRR by investing largely in existing properties, though there is a limited amount of capital set aside for investing in new development projects.
All of the investments will be with private pay properties in markets on both the East and West Coasts of USA and which are considered to have high incomes.
Kansas PERS and AEW have been investing together for some time as the pension fund already has a core separate account relationship and a global REIT mandate with them too.
At the same time, Kansas PERS has also added more industrial to its portfolio and hired a new real estate consultant.
The pension fund recently made a $20m commitment to the $750m KTR Industrial Fund II which invests largely in existing US warehouse/distribution properties, but it could place up to 25% in new development projects and invest up around 5% in Mexico or Canada to deliver projected gross IRR of 16-18%.
Kansas PERS has also replaces PCA Real Estate Advisors as its new real estate consultant and signed The Townsend Group after PCA last year announced it would not be renewing contracts with many of its US pension fund clients.
Anthony Frammartino will act as the Townsend principal to the Kansas PERS account.
The pension fund had a real estate portfolio valued at $977.8m to the end of July while its total plan assets were $12.89bn for the same time period and targeted real estate allocation was 10%.