South Carolina Retirement System (SCRS) is planning a commitment of up to $200m (€167m) into the Heitman Core Real Estate Debt Income Trust, which would boost the debt proportion of its real estate portfolio from 11% to 15%.
The US pension fund said in a board meeting document it was planning to make the investment commitment to the Heitman fund, which increases the size of the commingled fund by 44%.
The Heitman Core Real Estate Debt Income Trust — an open-ended vehicle aiming to raise $1bn of capital — now has closed commitments of $260m with a third closing of the fund planned for around 7 September.
Once the South Carolina pension fund’s commitment to the debt fund is approved, its real estate debt exposure will increase to 15% of its total real estate portfolio from from 11%.
The Heitman Debt Trust is targeting net returns between 7.5% and 9.5%, and leverage is projected to be $1.5bn, so that on a long-term basis it will have a $2.5bn loan portfolio.
It expects to have a total of 50 deals placed into the fund with an average loan size of $50m, and will only consider income-producing assets.
It will originate floating-rate loans and stretched-senior loans, and the type of properties involved will be a combination of office, industrial, retail and apartments.
Between 20% and 30% of the loan portfolio — or $500m to $750m — will consist of specialty property types.
The fund will target gateway cities and markets that show strong job and population growth.
SCRS said Heitman had closed three deals for the fund, the largest being a four-property senior housing portfolio in Chicago and Kansas City.
The $103.5m loan provided acquisition financing on the assets, according to the pension fund.
The debt fund had also provided refinancing of $60m for a creative office building in Culver City, California, and the third deal was a $32.5m acquisition financing loan for an apartment complex in San Jose.
In July, IPE Real Estate reported that the State of Wisconsin Investment Board (SWIB) and Hawaii Employees’ Retirement System had been among investors in Heitman’s first capital raise.