UNITED STATES - Ohio Police & Fire pension fund has approved a real estate strategy to invest $162m (€103.8m) in the asset class for 2008.
The pension fund will split this to place $104m in non-core commingled funds and $58m in core investments, as part of the real estate portfolio which was valued at $1bn at the end of February.
Real estate accounts for 8.3% of the fund's total assets but the scheme has an established targeted real estate allocation of 8%.
Its first commitment for this new capital was a $25m investment in two commingled funds managed by Lone Star having worked with them for some time: $16.5m into Lone Star Fund VI and $8.5m into Lone Star Real Estate Fund I.
Lone Star is looking to raise $1.5bn for Real Estate Fund I - its first dedicated US-only real estate fund as past funds had a wider global strategy - to deliver projected returns of 25% gross and 18% net IRR.
Lone Star believes there are going to be many strong real estate investment opportunities for ‘non-core' property in the United States over the next two years as this sector has been most impacted by changes in the debt market.
Potential deals for Real Estate Fund I will therefore be in distressed debt, existing assets seen as underperforming along with development and redevelopment plays.
Lone Star Fund VI, meanwhile, is a $5bn global opportunity fund which will see around 25% of the fund's assets applied to real estate-related transactions in locations such Germany, Japan and the United States.
Investors in the commingled fund are anticipated to achieve a 25% gross and 19% net IRR.