Sacramento County Employees’ Retirement System (SCERS) is investing in non-core real estate in Japan via a fund managed by Seven Seas.
The pension fund revealed in its meeting document that it has made a $20m (€18m) commitment to Seven Seas Japan Opportunity Fund, a fund seeking to raise $250m. The fund’s planned leverage is capped at 55%.
The targeted net internal rate of returns for the fund are projected to be in the range of 15% to 17%, according to SCERS.
Steve Davis, Sacramento County Employees’ Retirement System’s CIO, said: “Japan is the third-largest economy in the world behind the US, and China and the Japanese real estate market is also the third-largest behind the US and China. An investment in Seven Seas offers portfolio diversification and a favourable risk-return profile.”
The Japan fund will focus on buying assets like offices, retail, multifamily and hotels located in Tokyo and Osaka.
Davis said the fund’s value-add strategy includes “conversions, renovations, development, redevelopment, forward purchase commitments, corporate restructurings, loan workouts and management company changes.”
At the end of last year, the $13bn pension fund had 18% of its real estate portfolio invested in value-add versus compared with its 20% target. The pension fund’s non-US portfolio was at 26% versus a 35% target.
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