UNITED STATES - Ohio Public Employees Retirement System (PERS) has made $75m (€48.3m) commitments to Carlyle Europe Realty Partners III and Blackstone Real Estate Partners Europe Fund III.
The pension fund chose these value-added commingled funds because it believes that these managers are top performers for European commingled funds - a move which falls in line with the pension fund's overall investment strategy of placing capital with the best-in class real estate managers.
Ohio PERS is expecting to see a projected gross IRR of 20% from the two funds.
The pension fund could yet invest another $150m in closed-end funds by the end of this year while another part of its 2008 real estate strategy was to invest up to $100m in core open-ended commingled funds.
No commitments have been issued yet, however, as the pension fund is concerned about the pricing of core assets.
At the beginning of 2008, the pension fund had allocated $549m for the purchase of properties through separate account managers. The amount spent on acquisitions so far has been $306m.
These deals have so far included buying office, industrial, retail, apartments and hotels but Ohio PERS is taking a guarded approach for future acquisitions because of pricing concerns.
The pension fund has now put off some sales of its existing real estate portfolio for this same reason but it had planned to sell another $300m worth of real estate for this year.
Officials note there the crisis of confidence in the debt market has limited the availability of financing for buyers.
This is partly why it chose these particular funds, as the Blackstone Group is hoping to raise €3bn for Europe Fund III so it can buy public to private distressed debt situations and take advantage of corporate and government real estate sales of hotels, healthcare, student housing and operating companies in the UK and continental Europe.
The Carlyle Group, meanwhile, is looking to raise €1.5bn for Europe Realty Partners III so monies can be invested in assets which have poor physical appearance, need to go through planning approval and have leasing issues in markets such as France, Germany, Italy, Spain, Portugal and the Scandinavian countries.