The Oregon Public Employees’ Retirement Fund has approved a $300m (€222m) commitment into the Lone Star Real Estate Fund III.
Lone Star is looking at a total capital raise for the fund of $6bn.
It will focus on distressed debt and equity investments in multifamily and commercial real estate assets.
The fund is looking to invest in three regions around the globe.
Both the US and Europe are expected to make up 40% of the fund, with the balance in Japan.
Tony Breault, senior investment officer for real estate, said the targeted returns for the fund were a 25% gross IRR.
The pension fund investment staff and its consultant, Pension Consulting Alliance, cited Lone Star’s track record in taking advantage of market dislocations.
Lone Star in many cases gets involved in large and often complicated transactions/loan pools.
This investment strategy gives Oregon an additional layer of diversification, as Lone Star rarely competes with other managers in the pension fund’s real estate portfolio.
Oregon has a large pipeline of additional real estate investments it will be considering for the fourth quarter of this year and the first quarter of 2014.
The total amount investment could be in excess of $700m.
These investments include a $100m allocation to an equity/debt separate account for a value-added strategy in the US, a $200m core West Coast multifamily separate account, a new $100m allocation to Lionstone for a value-add strategy, a $200m opportunistic global separate account and a $100m commitment into a club fund that has a value-add strategy with an existing manager.
Oregon has two other deals in the pipeline where it has not determined an investment amount – a value-added debt/equity strategy to invest in Europe and a multifamily value-add investment.
“We have had some staffing issues in the past couple of years that have slowed our progress in the real estate asset class,” Breault said.
“We want to get back to being a more active investor with real estate.”
Oregon is now in the process of getting some additional diversification within its $1.5bn REIT portfolio.
“Around 70% of this portfolio is currently managed by LaSalle,” Breault said.
“We would likely transfer around $200m-250m to another manager for diversification reasons.
“We will for sure be finding another domestic REIT manager for this portfolio.
“We are also thinking about a global mandate for a portion of the portfolio.”
