Louisiana Teachers sets aside $125m for senior housing, distressed debt
The Teachers’ Retirement System of Louisiana has approved $125m (€113m) in new commitments into senior housing and distressed real estate debt.
The pension fund is to invest $50m into AEW Senior Housing Investors III and $75m into Lone Star Fund X.
The targeted $500m capital raise by the manager would be the largest capital raise it has done for its senior housing fund series.
Its other two funds had total capital raises of $371m, for Fund II in 2012, and $1188.2m, for Fund I in 2009.
AEW is planning to invest 50% of the capital for Fund II into development properties.
This is due to the attractive risk-adjusted returns associated with building from the ground up, rather than modernising outdated assets.
Fund III is targeting a 12-13% net IRR, with leverage expected to remain below 65%.
AEW will be investing in a mixture of independent/assisted living and memory care senior housing.
All of the capital will be invested in the US, targeting primary and secondary markets exhibiting strong supply/demand fundamentals and demographics.
AEW will invest through joint ventures with operators, often on a repeat basis.
Meanwhile, Lone Star is planning a $6bn capital raise for Fund X, targeting a 25% gross IRR.
Lone Star will invest in a broad range of distressed deals involving financial and other investment assets.
Fund X has a global strategy, seeking opportunities in North and Latin America, Europe and Asia.
Louisiana Teachers is also looking into the possibility of making an allocation into domestic/global REITs for the first time ever.
No decision has been made as to how much capital might be allocated for this strategy.
The pension fund is unlikely to make a final decision on this until some time in the first quarter of next year.