​San Francisco ERS targets Europe via Tristan, Westbrook funds

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San Francisco Employees’ Retirement System is investing in two real estate funds targeting Europe as it begins to build its exposure to the region.

The pension fund has approved a €100m (€89m) commitment to the European Property Investors Special Opportunities (EPISO) IV, a fund managed by Tristan Capital Partners, and €50m to the Westbrook Partners’ Real Estate Fund X.

The move comes soon after San Francsisco ERS made its first allocation to European real estate earlier this year, committing €100m to a Nordic real estate fund managed by NIAM.

According to board meeting documents, there is an opportunity in Europe for value-add real estate managers to invest in out-of-favour assets at attractive prices, improve them and sell into a highly liquid market.

Tristan is targeting a €950m capital raise for the fund, with a hard cap of €1.5bn, the pension fund said.

Tristan did not comment.

The pension fund said the manager will co-invest of 1% of aggregate commitments up to a maximum of €10m. A first close of the fund is expected later this month.

The pan-European fund is expected to use around 60% leverage and will target net returns of about 15%.

Westbrook Partners’ Real Estate Fund X is pursuing an international strategy, according to San Francisco ERS, and will invest 40% of its capital in western European markets. Roughly half of its investments will be made in US, with 10% expected to be allocated ot Japan.

Westbrook Partners is looking to raise $2.5bn, with leverage kept below 50%, which, according to the pension fund, is lower than other opportunity funds that commonly use leverage as high as 70%.

Maine Public Employees Retirement System and Teacher Retirement System of Texas are among other investors in the fund.

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