NORTH AMERICA – Pramerica Real Estate Investors has raised $430m (€320m) for its latest commingled fund, US Property Fund V.

David Pahl, senior portfolio manager, said: “We attracted capital from a total of nine investors. These were a mixture of pension funds and life companies based in Germany. 

“For two of the investors, this represents the first time they have invested in real estate outside of the US. 

“It’s my impression they look at this investment as a way to diversify their portfolio and believe they can achieve strong risk-adjusted returns by investing in real estate in the US.”

Pramerica is planning on splitting up the portfolio for Fund V into two separate investment strategies.

“Around two-thirds of the assets will be with core-plus kinds of investments,” Pahl said.

“These would include buying existing properties with strong current income where value could be added by leasing up the empty space and to make some capital improvements. 

“The other one-third of the portfolio would be invested in apartment-development projects.”
PREI has already invested $130m of equity from the commingled fund. 

One of these deals was a partial joint venture interest in the $223m acquisition of the 484,000 square foot 650 California Street office building in San Francisco.

The real estate manager acquired this property in a JV with Tishman Speyer Properties. 

The cap rate on this deal was 5%.

The other investments are office buildings in San Diego and New York City and an apartment complex in Phoenix. 

The fund has also secured apartment development projects in Houston and Dallas.

The major focus for the core-plus deals are for office buildings in the major gateway cities of San Francisco, New York, San Diego, Washington, DC and Los Angeles. 

It will also be looking in ‘next tier’ markets such as Seattle, Houston and South Florida.

The investments for apartment developments would be located in the top 10-15 apartment markets in the US.

PREI has a total capitalisation for Fund V of around $1bn. 

This is achieved by employing 60% debt financing at the fund. 

The fund lacks a specific investment period, but does have an eight-year life and two one-year extension options. 

Most of the deals for the fund will include equity contributions of $60m-70m.