Kansas Public Employees Retirement System (PERS) has approved a commitment of $50m (€42.7m) into the AEW Partners Real Estate Fund VIII.
Fund manager AEW Capital Management is seeking $650m for the final close – significantly more than the $565m it raised the previous version of the fund.
AEW will be placing a co-investment into Fund VIII of $15m. Its allocation would not be permitted to exceed 3% of the fund. The group declined to comment when contacted.
The commitment from Kansas PERS was the pension fund’s first real estate commitment for 2017. It planned to allocate $145m to the asset class in total during the year through a non-core commingled fund strategy.
Kansas PERS previously made a $35m commitment in 2008 into AEW Senior Housing Investors.
The leverage for AEW Partners Real Estate Fund VIII would be higher than 66.67% of gross asset value, Kansas said in an email.
AEW’s new fund will consider opportunities in repricing, capital dislocations, and market arbitrage. For example, multi-tenant industrial and hotel properties are currently out-of-favor with the capital markets, while energy-exposed markets such as Houston are creating dislocations.
AEW will look to buy well-located real estate that needs to be repositioned or repurposed to meet changing needs of tenants. This would include opportunities for repositioning Class A apartments that were developed prior to the global financial crisis and are already outdated by today’s standards.
AEW will also be investing in assets that are considered to be in transforming markets or locations, such as Portland or Salt Lake City. These are emerging as hubs for well-educated, creative workforces, providing opportunities for apartment, office, and retail development as well as redevelopment opportunities.