The Pennsylvania Public School Employees’ Retirement System has approved a $150m (€132m) commitment to a core US industrial fund run by Cabot Properties.
The commitment to the Cabot Core Industrial Fund will cover 20% of the manager’s proposed $750m equity raise.
With 40% leverage, the US-focused fund will have a $1.1bn cap.
Pennsylvania Public School made the commitment based on strong operating fundamentals for industrial properties, with the sector enjoying its lowest vacancy rates since 2001 and rents rising 4% year on year.
The fund is Cabot’s first core vehicle, having previously invested in industrial properties through value-add funds.
Pennsylvania Public School participated in the funds with a $100m commitment to Cabot’s Industrial Value Fund III in 2008 and $75m to the Industrial Value IV in 2013.
Cabot has been active in Atlanta, Chicago, Dallas, Florida, Los Angeles, New Jersey and Pennsylvania.
Courtland Partners, which advises Pennsylvania Public School, said the fund would target net returns of 8-10%, with an initial current yield of 5-6%.
Around 70-80% of returns are expected to come from current income, with the balance from appreciation.
Pennsylvania Public School said Cabot reviewed $2.2bn in core transactions during the year to September 2014, with 43% of opportunities being deals that fell within the parameters of Cabot’s core fund.
The higher return requirements of the value fund meant bids were unsuccessful or not made.
