UNITED STATES - New Jersey Division of Investment has approved a $100m (€64.1m) commitment to the Lehman Brothers Real Estate Partners III commingled fund.
The pension fund had this investment item tabled from its February board meeting but there was no a quorum available for a presentation, so the decision was finally made, with the assistance of its real estate consultant, The Townsend Group, on March 20 as New Jersey believes Lehman Brothers will have strong access to deal flow through its network of banking relationships with large corporate and retail clients, as well as teams as local operating partners.
Europe will be a particular focus for potential investments as the Real Estate Partners III has given Europe the highest proposed geographical target, set at 40%, a key sector of which could be Central and Eastern European residential.
The other major regions of Asia and North America both carry allocations of 30% respectively but there is also a provision in the fund which allows up to 20% of the fund to be invested outside of the three regions.
Lehman Brothers is expecting to raise $4bn-$5bn through the fund, and will itself make a co-investment of $800m, while investors are projected to receive gross IRRs of 25% or 18% net.
The commingled fund will focus primarily on smaller and middle market transactions with mostly hard assets in the office, retail, industrial, residential and hotels sectors, and the vast majority of these deals will be done with the assistance of local operating partners.