The Ohio Bureau of Workers Compensation Fund is investing $50m (€44.8m) in a US value-add fund operated by Latitude Management Real Estate Investors.
The US pension fund backed the manager’s fourth real estate debt fund.
Ohio BWC wrote in an email that Latitude Management had a “depth of experience” in executing its focused investment strategy.
The commitment from Ohio BWC is up to a maximum of 20% of total investor capital committed to the fund, which is targeting a $250m capital raise.
At least 95% of capital for the fund will be invested in first-mortgage bridge loans on commercial properties undergoing improvements to increase revenues and market value under new ownership.
The fund is targeting an annualised return of 10-11%.
Loans will be offered on a floating rate, with 3-5 year terms, typically in the $5m-15m range.
Leverage will not exceed 60% of capital invested.
Apartments will be the main focus, making up as much as of 60% of the fund’s portfolio.
Smaller office buildings and middle-market flagship hotels will also be targeted.
Ohio BWC said the manager’s previous fund had provided a net IRR of 10% to date for limited partners.
The pension fund made a $50m commitment to the fund in 2013.
The manager has drawn $47.5m of the commitment.